‘The sites are ready’: Power giant wants AI data centres built at its coal plants

The owner of two giant coal-fired power plants in Victoria and New South Wales is pitching its sites as prime real estate for new data centres, saying their ready-made access to the electricity grid, water and industrial-zoned land make them the ideal homes for the energy-hungry facilities.

EnergyAustralia, the nation’s third-largest electricity and gas retailer, is pursuing plans to convert the Yallourn coal-fired generator site in the Latrobe Valley into a low-carbon energy hub that could support new “hyperscale” data centres once the power station is retired in two years’ time.

EnergyAustralia is due to close the Yallourn generator on June 30, 2028, while its other coal-fired power station – Mt Piper in NSW – is to be retired sometime in the 2030s.

Chief executive Mark Collette said coal-fired power plant sites offered the exact features required by data centres, including water and around-the-clock electricity to run their high-intensity computing and cooling systems, a skilled workforce and supportive communities. He said these sites would offer data centre developers the fastest track to getting new facilities built and plugged into the grid.

“The sites are ready,” he told an Australian Energy Council event in Melbourne on Wednesday.

“Coal power sites can connect big data centres within a couple of years – start from a greenfield paddock, and you’re [taking] most of a decade.”

Plans to build dozens of new data centres – buildings filled with servers that store and transmit online data – are attracting intensifying scrutiny across Australia, partly due to the vast amounts of power they will require and the strain they threaten to place on the grid.

Australia is already home to 165 operating data centres, which consume 2.8 per cent of total electricity demand on the eastern seaboard today. The Australian Energy Market Operator assumes that that figure could rise nearly seven-fold to 13 per cent of demand by 2035.

Despite community pushback, the data centre investment boom is also coming at a critical time for Australia amid a period of sluggish economic growth. Investment analysts have 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 which the government has welcomed at a time of slow growth, even as community opposition builds.

However, securing access to enough land and renewable energy have emerged as two of the biggest potential roadblocks to further projects proceeding. Last month, state and federal energy ministers agreed to develop a set of national standards requiring data centres to source 100 per cent of their electricity from renewables, backed up by firming assets like batteries and fast-start gas power stations.

EnergyAustralia has been in early-stage talks with potential investors and data centre companies about the opportunity to repurpose Yallourn as an “energy security precinct”, containing solar power, back-up gas power and battery storage. He said the company was not waiting “sitting on our hands” waiting for the Yallourn coal plant to close in 2028, but was actively planning for “what comes next”.

“We are doing the work now, so when the day comes, there is something to walk into,” he said.

Also on Wednesday, the chief executive of Santos, one of the largest Australian oil and gas companies, pointed to burgeoning energy demand from data centres as a major reason that the world needed to continue investing in all forms of energy, including fossil fuels.

“Last year, demand for every single energy source grew,” Santos managing director Kevin Gallagher told the National Press Club. “The world did not swap one energy source for another – it took more of everything.”

Gallagher also confirmed Santos would throw its weight behind Labor’s domestic gas reservation scheme, requiring the nation’s liquefied gas exporters to set aside 20 per cent of their export volumes for the local market only from mid-2027, provided it ensures existing contracts with Asian buyers remain untouched and loosens a requirement for producers to not only offer, but sell, supplies into the domestic market.

His call clashes with the demands of an alliance of unions, environmental groups and major gas users, which earlier this week argued the government must not cede to gas industry lobbying, and argued a forced oversupply of gas was necessary to get prices back below $10 a gigajoule – the level that manufacturers insist is necessary to prevent further factory closures.

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