By Nick Toscano
An explosion in the number of data centres in Australia is looming as a new test for the energy grid amid warnings they might soon require as much as electricity as two giant coal-fired power stations are capable of generating.
As cloud-based computing and artificial intelligence (AI) accelerate demand for data storage, Melbourne and Sydney have emerged as key locations for tech companies building vast industrial facilities to house their servers that send and receive data 24/7, known as data centres.
An Amazon data centre in the US.Credit: Bloomberg
These data centres, which need huge amounts of electricity to run high-intensity computing and cooling systems, are already major power users in Australia – consuming about 5 per cent of available generation.
They are expected to drive further electricity demand growth alongside homes switching from gas to electric appliances and the growing adoption of electric cars.
However, new modelling from UBS suggests official forecasts may be underestimating the scale of the added demand that data centres could drive in the coming years.
The investment bank calculates between 3.3 gigawatts and 5 gigawatts of demand – equivalent to the combined generating potential of approximately two of Australia’s biggest coal-fired power plants – could be added to the east coast grid by 2030 on the back of growth in data centres and artificial intelligence.
At the top end of the range that could equate to up to 15 per cent of overall grid demand, which could add significant strain to supplies and push up prices unless properly managed.
“If we are right, and data centre load is in that plus-3.3 to 5 gigawatt [range] by 2030, we think current government forecasts are significantly underestimating the load growth in demand,” UBS energy analyst Tom Allen said.
The data centre boom is coming at a time of upheaval for Australia’s main grid as it transitions to cleaner energy, while the coal plants that have supplied the bulk of its power for decades increasingly bring forward their closures.
Although renewables’ share of the mix is growing, there are worries it’s not happening fast enough, with authorities fearing a shortfall of generation, storage and transmission lines to protect against the threat of price rises or blackouts once coal exits the grid.
Analysts at Morgan Stanley believe the grid will be able to accommodate extra demand from data centres’ growth, which it forecasts to rise from 5 per cent to about 8 per cent by 2030.
However, the system will face more strain next decade when the majority of the nation’s remaining coal-fired power plants are expected to have closed, they said.
“We see the power requirement for new Australian data centres as manageable for the Australian power system to 2030, but power could become a constraint in the 2030s given planned coal plant closures,” they said.
UBS said data centres may provide benefits for grid planners trying to maintain system stability, given they offer consistent minimum demand 24/7 – similar to the role of aluminium smelters. But they would add “incremental pressure” during evening peak demand periods once the sun sets and solar output recedes, Allen said.
The spread between daytime and evening wholesale prices could widen to up to 70 per cent by 2030 due to coal closures and delays to the renewable rollout, he added.
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