Australia’s data centre industry will play a key role in the nation’s clean energy transition, but the Clean Energy Finance Corporation (CEFC) is calling on investors to ensure they are built sustainably.
The CEFC and management consultancy Baringa forecast that data centres could make up to 11 per cent of Australia’s total electricity consumption by 2035, up from 1 per cent today, according to a new report Getting the balance right: Data centre growth and the energy transition.
The CEFC estimates that data centre capacity will increase from 1.35GW today to between 4.7GW and 7.4GW by 2035, cementing Australia’s place among Asia-Pacific’s top data-hosting nations.
Without additional new renewable energy and storage, the CEFC warned that by 2035, data centre growth could increase New South Wales’ wholesale power prices by 26 per cent and Victorian prices by 23 per cent, while increasing grid emissions across the National Electricity Market by 14 per cent, or equivalent to six million tonnes of CO2 annually.
This increase in power prices and electricity consumption makes it more imperative that data centres are being developed sustainably, according to the report.
Investors could play a key role in creating green data centres by utilising their capital towards projects and companies that prioritise ESG factors.
CEFC Head of Infrastructure Julia Hinwood said: “Data centres are critical infrastructure powering the modern digital economy. With the right policy settings, renewable generation and storage, and operational innovation, Australia can position itself as a leader in clean digital infrastructure.
“With this rapid growth comes the potential for adverse impact on the energy grid as well as electricity prices.
“By investing early in renewable energy and storage capacity to power the sector and implementing appropriate regulatory settings, we can avoid these pitfalls and benefit from a booming new industry.”
The CEFC called on investors and developers to align with the Australian Sustainable Finance Institute (ASFI), ensuring credible climate-aligned investment prioritised projects that sought better environmental outcomes, such as those powered by 100 per cent renewable energy.
The report makes four key policy priorities to ensure that data centre growth is sustainable, and a nationally coordinated approach to guide planning and investment certainty.
These policies include improving data on future electricity demand and project pipelines, as well as incentivising and enabling data centres to procure or underwrite new renewable and firming projects.