A sharp increase in the construction of AI data centres is complicating the Albanese government's efforts to reduce carbon emissions in the electricity sector. Energy consumption is rising faster than what the existing renewable energy infrastructure can sustain, leading to an expected increase of 10 million tonnes of emissions by 2035 and 16 million tonnes by 2040 compared to previous estimates.
Australia is witnessing a surge in data centre investment, driven by rapid adoption of artificial intelligence since late 2022. In the September 2023 quarter alone, $2.8 billion was invested in new projects. This figure is more than double that of the previous quarter and exceeds total data centre spending from the past seven years. These facilities draw large amounts of electricity to power servers and cooling systems, pushing the Climate Change and Energy Department to update its emissions projections.
New modelling shows that data centres could make up 6% of electricity demand on the east coast grid by 2030 and 11% by 2040. Meeting this demand has already proven difficult due to supply bottlenecks affecting major operators. Alongside recent policy shifts in Queensland, these issues could result in higher emissions unless a faster transition to renewable energy is achieved.
Australia’s emissions reduction plan aims for a 43% cut by 2030 and depends on reaching 82% renewable power in the grid. However, industry experts warn of a gap between ambition and reality. While tech companies are eager to invest in renewables through long-term purchase agreements, several energy projects are defaulting to coal and gas as a result of regulatory delays and limited grid access.
This pattern raises concerns that ageing fossil fuel plants may become more heavily utilised, potentially increasing energy costs and slowing the reduction of emissions. Government efforts include promoting energy efficiency and encouraging clean-energy investment, but analysts agree that without a significantly faster rollout of renewables, emissions will keep rising even if AI and data centre development supports economic growth.
