Federal Government Moves to Override Queensland on Data Centre Energy Rules
Prime Minister Anthony Albanese will meet with state and territory leaders in Sydney on Wednesday to settle new national energy and water rules for AI data centres, despite strong opposition from Queensland and the Northern Territory. The federal government expects to finalise standards that would require new data centres to source their power from renewable projects backed by gas, a measure designed to prevent the energy-hungry facilities from driving up power prices.
Queensland Premier David Crisafulli has sworn to stand his ground, arguing that energy sources for data centres should remain "technology agnostic." The Queensland and Northern Territory governments both say they will not sign on to a standard that ties data centres to renewables to the exclusion of coal and gas.
Energy Minister Chris Bowen has signalled the federal government's intention to legislate "causer pays" energy rules next year for big facilities, even if all states and territories sign on, allowing the Commonwealth to override dissenters. He told the ABC, "The Queensland government's made their views pretty clear; we disagree with them, and we're proceeding without them." Bowen criticised Queensland's stance as an "open slather approach" that would lead to a "race to the bottom," pushing up energy bills and reducing reliability.
Shadow Energy Minister Dan Tehan questioned the constitutionality of overriding Queensland, suggesting the government might use the Corporations Act power. He warned that tying data centres to renewables could lead to an even bigger backlash.
The Dispute and the Federal Plan
Under Labor's policy, which is set to be legislated early next year, all next-generation data centres—those that train and power artificial intelligence agents—will be required to use renewable electricity and add more power to the grid than they consume. The federal government says the rules are necessary to ensure the economic benefits of AI are shared widely and to prevent data centre developers from playing states off against each other.
The Guardian reports that Albanese will also use the talks to promise that new approval laws will complement state rules, aiming to quell growing unhappiness about national controls. The proposed legislation will include tough copyright rules for AI businesses and standards for security, safety, and skills development. It will also require data centres to meet their own infrastructure costs, minimise water use, and be appropriately located away from homes, schools and potential housing or agricultural sites. Projects approved before the new rules come into effect will be subject only to existing state and territory laws.
Queensland's alternative proposal would require data centres to provide a social impact assessment and a community benefit agreement with the relevant local council before lodging a development application. Crisafulli said, "This is about data sovereignty for our country, it's about respecting communities' wishes and resources, and it's about creating the jobs of tomorrow while protecting the Queensland of today."
However, Bowen dismissed nuclear small modular reactors as the "most expensive form of energy and the longest to deploy," and Queensland Deputy Premier Jarrod Bleijie reacted angrily, calling Bowen a "fool" and a "big brother bully." Bleijie said his government would not be "forced" into a particular energy pathway by the Commonwealth.
The Data Centre Boom and its Impact
The dispute comes amidst explosive growth in data centre demand. The Australian Energy Market Operator (ASPO) has estimated that data centres could grow from consuming 3 percent of the nation's electricity supply to 13 percent in a decade. The Guardian reported that AEMO projected data centre power use to increase seven-fold over the next decade, with electricity demand growing from 5 to 34 terawatt hours by 2035-36. A high-growth scenario could see consumption reaching 52 TWh, a ten-fold increase.
AEMO's Daniel Watterson said record levels of new generation and storage had improved reliability outlook even with retirement of coal power stations. But confidence in the projections is high levels of uncertainty, with more than a third of projects listed in 2025 since cancelled. There are also concerns about the pace of renewable energy deployment: at least nine renewables projects announced under the Capacity Investment Scheme have withdrawn, and most projects that won underwriting support are yet to reach a final investment decision.
Climate Council CEO Amanda McKenzie warned that data centres are set to "devour an enormous share of Australia's electricity in the coming years" and stressed that ""We've got one shot to get the rules right now and ensure that data centre growth doesn't strain our grid and push up pollution."
Overall, the government estimates that investment plans announced over the past three years could amount to more than $100 billion for the Australian economy. In the the international area, the US group Data Center Watch reported that US data centre projects worth more than than $US100 billion had been blocked or delayed by local opposition this year.
Other Business on National Cabinet
The national cabinet meeting is also addressing other matters. Leaders gathered in Sydney will receive a briefing from the chief veterinary officer on the new outbreak of H5----, highly infectious disease that has now been detected in all six states. The leaders will also discuss fuel security measures amid ongoing disruptions caused by the U.S. is a war with Iran.
On domestic violence, agreement is expected on progressing the next five-year plan to end violence against women and children, with the threat of ever new reforms from the crossbench. More than a dozen crossbenchers have signed a letter to Albanese asking that he use the meeting to prioritise calls for the Domestic, Family and Sexual Violence Commission to become a statutory authority. The letter claims, "A decade of reviews and inquiries into domestic, family and sexual violence has produced more than 1,000 recommendations, yet women and children continue to die, and too many systemic failures remain."
Bloody ground rule is the federal gun buyback. Only NSW and the ACT have signed up so far, and the talks are unlikely to progress the federal plan. The GST is not on the agenda, but Prime Minister Anthony said "There will be no change to WA's GST arrangements" while addressing the Business Council event.
Perspectives
Federal government (Labor Party): Energy Minister Chris Bowen says the government is proceeding with new data centre rules despite Queensland's views, arguing that without them Australia would face "race to the bottom" with higher bills and down reliability. The federal government says it is prepared to legislate over states to ensure affordable, reliable energy.
Queensland state government: Premier David Cl Risafulli and Deputy Premier Royleij that the government will not be forced by the Commonwealth into a renewable-only pathway and insists on technology-agnostic approach. They argue the federal rules remove this sovereign ability to decide energy source for own state, and they want a local consent process.
Northern Territory government: Chief Minister Lea are becoming vocal on the NT's and are globally allied with Queensland in resisting the Commonwealth renewable-only standard for data centres.