Nexa Advisory welcomes the opportunity to provide a submission to the NSW Government’s consultation on reforming electricity network connection and cost recovery arrangements for data centres.
Nexa supports reforms that accommodate growth in data centre demand without shifting the resulting network costs or investment risks onto other electricity consumers. NSW households and businesses should not pay for network investment needed to serve these new large commercial loads.
Nexa welcomes the NSW Government taking a proactive and coordinated approach to managing data centre growth. The overall design of the framework – spanning planning, network reform and coordination of large-load investment – is a positive step toward managing this growth in a coordinated and strategic way.
Data centres represent a significant economic and infrastructure opportunity for NSW. As critical infrastructure for the digital economy, policy should enable high-quality investment while ensuring that growth delivers net public benefit. This will depend on coordinating new data centre demand with the renewable generation, storage and network investment NSW already needs as the electricity system transitions. If planned together, data centre investment can help underwrite and accelerate that infrastructure, rather than simply add to system costs and constraints.
Data centres should be treated as strategic demand-side infrastructure, not simply as large electricity users. Their scale, load profile and creditworthiness can make them long-term demand anchors for additional renewable generation, storage and firming. Policy should harness this opportunity, rather than treat data centre growth solely as a problem of allocating scarce network capacity.
The scale and pace of data centre growth have broader implications for network visibility, joint planning, cost recovery, connection processes and the incentives for Network Service Providers (NSPs) to plan and invest efficiently. Any new obligations on data centre proponents should be matched by better public network information, effective joint planning and fit-for-purpose connection processes provided by NSPs.
These issues are not unique to data centres. Wherever practicable, enduring principles-based reforms should apply to large loads according to their network impact. This would support technology- and customer-neutral outcomes, avoid disproportionate burdens on particular connection proponents and provide a more durable framework for integrating future sources of large demand into transmission, distribution and system planning.
Key asks
Nexa recommends the following reforms to protect consumers, improve planning and connections, and support efficient, market-led investment:
- Protect consumers from anticipatory investment risk – Require project and financial commitments proportionate to the network exposure created, while rigorously testing whether augmentation is prudent, efficient and least-cost.
- Make connection obligations reciprocal – Match stronger obligations on proponents with clear and streamlined connection pathways, transparent costs, enforceable service standards and practical escalation mechanisms for NSPs.
- Improve public network information and joint planning – Provide timely, granular public information on capacity, constraints and development needs, and use better joint planning to create credible pathways for non-network and flexibility solutions.
- Embed network transparency as an enduring obligation – Consider using NSW network licence conditions administered by IPART, or equivalent regulatory obligations, to require regular publication of network capacity, large load connection pipelines and load forecasts, together with information on material network constraints, likely augmentation requirements, expected timing and indicative costs of addressing those constraints. This would make improved network visibility an enduring requirement rather than a data-centre-specific response.
- Recover the efficient costs caused by new demand – Transparently identify and recover network costs caused or brought forward by large loads, including upstream impacts, while recognising genuine benefits and preventing double recovery.
- Ensure large load arrangements are nationally consistent, technology- and customer-neutral – Base obligations on material network impact rather than industry label or connection pathway, with NSW reforms designed to transition into enduring NEM-wide arrangements.
- Keep access arrangements market-led – Do not establish a bespoke data centre access scheme where better planning, flexible connections, commercial augmentation and non-network solutions can efficiently accommodate demand.
- Reward flexibility and efficient network utilisation – Enable flexible connections and more cost-reflective tariffs that reward useful demand response, while avoiding duplicative or conflicting mandatory flexibility obligations.
- Harness data centres to bring forward additional supply – Require credible additional renewable generation and firming outcomes while preserving competition between PPAs, bilateral offtakes, co-location and other market-led contracting structures.
Read our full submission here: Nexa Advisory submission – NSW network arrangements for DCs