Australia is about to experience one of the largest increases in energy demand. AI and the data centres that power it are expanding. Decisions made now will determine whether that growth strengthens the grid and speeds up the shift to renewable energy or whether households and businesses are left carrying the cost.
These concerns formed the basis of the Smart Energy Council’s submission to the Senate inquiry into Artificial Intelligence and Data Centres.
Why we made the submission
Australia’s data centre pipeline is worth an estimated $150 billion. AEMO forecasts these facilities could reach almost ten per cent of total underlying National Electricity Market demand by 2050, up from roughly two per cent today.
This demand could be an opportunity to underwrite new wind, solar and storage which our electricity grid needs. Handled badly, that growth in energy demand could increase prices and slow the transition.
This is why it’s critical that we set clear expectations for data centre industry growth now before it’s too late. We support the sector’s responsible growth but only if new demand brings new clean energy with it, and costs aren’t passed on to households and businesses.
What we called for
Our submission made four recommendations to the Australian Government:
- Make additional renewables a binding requirement, so data centres match their demand with new generation and firming rather than drawing on supply built for everyone else.
- Finalise the AEMC’s grid connection standards, giving operators and networks clear, consistent rules for connecting large loads.
- Pursue national harmonisation of energy reporting, so the sector’s energy and emissions can actually be measured across jurisdictions.
- Require transparency in government-to-AI-company deals, so agreements made in the public’s name serve the public interest.
Why this matters and what has changed
Last week, the Federal Government acted on the two recommendations central to our submission. In his National Press Club address, Minister Chris Bowen confirmed that data centres will be required to offset their electricity use with renewable energy through the Renewable Electricity Guarantee of Origin (REGO) scheme, establishing a binding renewables requirement. Operators will also need to prove firming capacity and operate flexibly so they aren’t straining the grid at peak times, ensuring new demand is genuinely backed by new supply rather than leaning on the existing system.
Our second recommendation is advancing through a separate AEMC process, which is embedding clear, consistent rules for connecting large loads into the National Electricity Rules.
Rhiannon Evans, Senior Policy & Advocacy Officer at the Smart Energy Council says “Gigawatt-scale data centres are in the pipeline already. The question was whether they would bring new clean energy with them or lean on the grid that households, businesses and other industries have paid to build. We support the Australian Government’s approach and will keep pushing to ensure these obligations are delivered.”
What’s next
Last week the AEMC publicly released its advice to the Energy and Climate Change Ministerial Council: a package of proposed rule changes to put the data centre energy obligation into practice. Alongside the REGO offsets above, it would require firming capacity to back new demand and open a pathway for data centres to provide demand flexibility and co-locate generation and storage. Data centres would contribute to the grid rather than acting as passive loads on it.
From here, rule change requests are expected to go before the Ministerial Council in September, with federal legislation slated for early 2027. Not every jurisdiction is aligned as Queensland and the Northern Territory have resisted a nationally consistent framework, so the detail will be important to watch.
The Senate Committee is due to hand down its final report by 16 November 2026.
Read the Smart Energy Council’s full submission here.
You can view all other submissions by the Smart Energy Council here.
