Nexa Advisory welcomes the opportunity to provide a submission to the Senate Environment and Communications References Committee’s inquiry into artificial intelligence and data centres.
Data centres are emerging as one of the most significant sources of new electricity demand in the NEM. Without coordinated policy, their expansion would place upward pressure on wholesale electricity prices, require significant network investment and increase reliance on costly fossil fuel generation. These costs will flow through to household and business electricity bills. With the right settings, data centres can bring forward the renewable generation, storage and firming needed to serve their load, reducing pressure on prices while accelerating Australia’s energy transition.
This is fundamentally a consumer-cost issue. Electricity customers should not be required to underwrite the generation, firming and network investment needed to serve highly concentrated new commercial loads. Data centres should face clear obligations to add supply, fund the efficient costs created by their connections and avoid increasing bills for other consumers.
Nexa Advisory’s core position is that data centres should be treated as strategic demand-side infrastructure, not simply large electricity users. Their scale, load profile and creditworthiness make them capable of acting as long-term demand anchors and supporting final investment decisions (FID) for renewable energy and storage projects.
The policy objective should be clear: data centre growth must bring forward the generation, storage, firming and network capacity required to serve it. Unless new supply is delivered alongside this demand and costs of any required network augmentation are allocated appropriately, data centre growth risks increasing electricity prices and bills for households and businesses that did not create the need for this investment.
Nexa recommends that the Commonwealth:
- Require additional supply and firming. New data centre demand should be matched by additional renewable generation, storage and appropriate firming through clear, enforceable obligations applied early enough to influence investment decisions and project delivery.
- Protect consumers from higher bills. Data centres should bear the efficient network connection, augmentation and broader system costs caused by their load, rather than shifting those costs to households and other businesses.
- Use project-specific REGOs for verification, not generic certificates. Government policy should require at least 40 per cent of a data centre’s electricity demand to be contracted with eligible new onshore wind projects -not solar or existing generation – using project-specific REGOs. The framework should establish a minimum compliance value of $30 per certificate ($30/MWh) to provide meaningful investment support, with a defined transition period for coordination and planning between renewable developers and data centre proponents. These targets will ensure data centre growth delivers a net public benefit.
- Coordinate approvals, connections and system planning. Governments, market bodies and networks should align the timing and location of data centres with deliverable generation, storage, firming and network capacity, supported by transparent capacity, cost and connection information.
- Harness long-term contracting. Policy should use the scale and creditworthiness of data centres to support final investment decisions for new renewable projects, particularly onshore wind, while allowing PPAs, bilateral offtakes, co-location and other credible arrangements to compete.
- Accelerate project delivery. Streamline planning and environmental approvals, improve connection processes and continue simplifying the Capacity Investment Scheme so new supply is available before the associated data centre load materialises.
Read our submission here: Nexa Advisory submission – Commonwealth inquiry into AI and DCs