Prime Minister Anthony Albanese has backed down on a federal demand that new AI data centres be powered entirely by renewable energy. Following resistance from Queensland Premier David Crisafulli and Northern Territory Chief Minister Lia Finocchiaro, the National Cabinet agreed to a flexible approach. The upcoming early 2027 legislation will establish national standards for energy, water, and land use, but will allow carve-outs for jurisdictions to use coal and gas. This shift comes as data centres are projected to grow from 3% to 13% of Australia's grid demand by 2036.
Federal renewable energy backdown
- ▪Australian Prime Minister Anthony Albanese backed down on a federal demand that new artificial intelligence data centres be powered entirely by renewable energy.
- ▪The federal government agreed to a flexible approach that allows carve-outs for specific jurisdictions to use fossil fuels like coal and gas to power data centres.
Queensland opposition to standards
- ▪Queensland Premier David Crisafulli opposed the federal mandate, arguing that Queensland should control its own energy mix because the state government owns the electricity distribution, transmission, and generation networks.
- ▪Queensland Deputy Premier Jarrod Bleijie stated that Queensland would not force renewable energy requirements on regional communities and called Federal Energy Minister Chris Bowen a "fool" for threatening to override states.
Northern Territory gas usage
- ▪Northern Territory Chief Minister Lia Finocchiaro secured agreement at the National Cabinet meeting to allow data centres in the territory to use gas from the Beetaloo Basin project.
- ▪Northern Territory Chief Minister Lia Finocchiaro pushed back against federal rules, arguing that the Northern Territory is not part of the National Electricity Market and has its own territory-owned power system.
Data centre energy demand
- ▪Australian companies invested nearly 9 billion Australian dollars on data centres and servers during the first three months of 2026.
- ▪The Australian Energy Market Operator estimates that data centre electricity consumption will grow from 3% of national grid demand in 2025–26 to 13% by 2035–36.
National standards legislation timeline
- ▪The proposed national standards will regulate energy, water, and land use for large-scale data centres, while leaving planning approvals with individual states and territories.
- ▪The Australian federal government plans to introduce new legislation establishing mandatory national standards for data centres in early 2027.
State-owned power system arguments
- ▪Federal government sources indicated that using gas for data centre power generation would likely be more expensive for operators than utilizing renewable energy.
- ▪Prime Minister Anthony Albanese flagged that carve-outs from the renewable mandate would apply to jurisdictions with public power ownership that have a surplus of fossil-fuel energy.
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