Green energy giants see $155b data centre boom as win for net zero

Major renewable energy investors have thrown their support behind Australia’s data centre boom, colliding with a growing backlash from community and environment campaigners who fear the power-hungry facilities will destabilise the grid and extend the nation’s reliance on harmful fossil fuels.

Plans to build dozens of new data centres – buildings filled with racks of servers that store and transmit online data – have come under intensifying scrutiny across Australia, largely due to the vast amounts of electricity and water they will require around-the-clock to run their high-intensity computing and cooling systems.

Critics fear the rush to build dozens more facilities, if not strictly managed, will raise the need to continue using coal-fired power stations and natural gas plants beyond their expected closure dates, while the Greens and Greenpeace have called for a moratorium on new data centre approvals.

However, in a significant intervention on Wednesday, a coalition of some of the biggest backers of Australian renewable projects, including Macquarie Asset Management’s Aula Energy, French energy giant Engie, Copenhagen Infrastructure Partners and the Andrew Forrest-backed Squadron Energy, said the tech sector’s surging demand for local data centres was a “net benefit” that would underwrite the next multibillion-dollar wave of wind, solar and battery storage.

A survey by the Clean Energy Investor Group – representing investors and developers holding a combined $41 billion in Australian renewables projects – revealed that 90 per cent of its members believed data centres could turn explosive demand growth into a catalyst for new generation capacity through long-term power purchase agreements.

“Data centres present a real opportunity for unlocking a new wave of clean energy investment,” the group’s chief executive, Richie Merzian, said.

Australia is home to 162 operating data centres, which consume about 2 per cent of total electricity demand on the eastern seaboard today. The Australian Energy Market operator assumes that could quadruple to nearly 10 per cent of demand by 2050.

The tech industry has been attempting to reframe data centres’ massive power requirements as an asset for the grid, arguing their deep corporate pockets can fund and accelerate the nation’s energy transition rather than destabilise it. Operators insist their facilities should be viewed as active “grid participants” capable of providing long-term demand signals and injecting vital private capital at a time when clean energy investment needs an urgent uplift.

However, Merzian cautioned that regulators and policymakers must ensure that the expansion of the data centre sector “must not be used as an excuse” to delay an approaching wave of coal-fired power station closures. Investors have signalled that they supported the introduction of new policy settings to encourage data centres to source “most or all” of their electricity from renewable generation.

To prevent the data centre influx from overwhelming the grid, state and federal energy ministers are due to meet this month to consider imposing strict new obligations on data centre owners before they are allowed to begin construction. These may include requirements for them to strike offtake deals to underpin enough new energy project capacity to offset their expected power consumption.

Federal Energy Minister Chris Bowen said ministers from all states, except Queensland, had agreed data centres should invest in additional renewables and firming projects in their state of operation to fully compensate for their power demand.

“Data centres are one of the biggest drivers of new energy demand – we’re acting to make them an asset to the energy grid, not a strain,” Bowen said. “If data centres want to benefit from Australia’s energy grid, we think they should do their bit to strengthen it – and it’s clear that the overwhelming majority of states agree.”

Australia ranked second in the world for data centre investment inflows in 2025, and a Westpac analysis has put the local pipeline at more than $155 billion. Microsoft has committed $25 billion to Australian data centres, and Amazon Web Services another $20 billion – money the government has welcomed at a time of sluggish growth even as community opposition builds.

Despite the windfall, community campaigners and crossbench MPs remain sceptical. They have questioned how much benefit will flow to everyday consumers rather than to the global technology giants that lease the buildings, and warned that promises of cheaper bills and local jobs should be weighed against the strain on water and power.

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