Govt seeks advice on data centre energy policy

How can we ensure data centres operating in Australia’s electricity grid are not disadvantaging other electricity consumers?

This is the question posed by Australian Energy Ministers to the Australian Energy Market Commission (AEMC), which in turn has produced a package of suggested reforms.

“Data centre growth does not have to come at a cost to other consumers, but that depends on getting the settings right from the start. Our starting point is simple: this growth must not leave other consumers worse off,” said AEMC Chair Anna Collyer.

Considered by the Energy and Climate Change Ministerial Council on 28 July 2026, the AEMC’s four recommended changes are as follows:

• Bring clean energy: data centres would surrender Renewable Electricity Guarantee of Origin (REGO) certificates from new, additional generators to offset the power they use.
• Prove they’re covered: data centres would need to show their demand is backed by new firm capacity, so their connection doesn’t tip the supply-demand balance and push up wholesale prices for everyone else.
• Register and play by market rules: data centres would become registered market participants.
• Be flexible: connection agreements would encourage data centres to shift demand and co-locate with generation, easing pressure on the network.
   

So that smaller facilities do not have to face the same requirements as the largest connections, the AEMC has advised these reforms could be staged and applied differently depending on a data centre’s size and load impact.

To manage the gap between a data centre’s connection and new renewable generation coming online, the advice also identified options for data centres to temporarily draw on existing renewables and make up any shortfall by surrendering additional certificates in later years.

Various other data centre reforms are currently before the AEMC. These include a rule change request submitted by the Australian Energy Market Operator (AEMO) to give it and networks better real-time visibility of large loads. Minister for Climate Change and Energy Chris Bowen has also lodged two related rule change requests to close gaps in how data centres pay for the network upgrades their connections trigger.

Additionally, the AEMC is progressing a rule change to update technical access standards for large inverter-based loads like data centres. A draft determination was published in March, and a final determination is due in late October.

The AEMC said that all these reforms aim to ensure that the businesses building large loads bear the costs and risks they create, not the households and small businesses connected to the same grid. It advised that further design work is needed, with federal, state and territory governments to determine how the package is implemented through legislation, new electricity rules, or both.

The Commission will run its own public consultation on the rule changes within its remit, working with stakeholders including data centres, other customer groups, industry, and the federal, state and territory governments, before anything is finalised.

Collyer said the AEMC’s approach was informed by experience overseas.

“The lesson from other jurisdictions isn’t that data centres are the problem, it’s that very large loads need to be planned, connected and operated as part of an integrated system. That’s exactly what this advice is designed to do,” she said.

More information is available here.

Image credit: iStock.com/alacatr