Australia’s rapidly expanding artificial intelligence industry is set for tighter regulation after federal, state and territory leaders reached agreement on new standards for large data centres.
Prime Minister Anthony Albanese and the premiers and chief ministers met in Sydney on Wednesday for National Cabinet, with the growing demand for AI computing infrastructure high on the agenda.
Data centres require enormous amounts of electricity to operate and cool the computer systems used by artificial intelligence companies. The rapid expansion of the industry has raised concerns about pressure on Australia’s electricity grid, water supplies and local communities.
The Australian Energy Market Operator has estimated that data centres could increase their share of Australia’s electricity consumption from about 3 per cent today to around 13 per cent within a decade.
The number of data centre projects under development has also increased sharply, with 225 projects now identified compared with 97 a year earlier.
The federal government had initially pushed for large new data centres to bring additional renewable energy capacity to cover their electricity requirements.
Queensland and the Northern Territory opposed that approach, arguing that states should have greater flexibility over their energy sources.
Following National Cabinet, Queensland secured an exemption that allows data centres in the state to use coal or gas as part of their energy mix.
Northern Territory leaders have also argued for greater flexibility because of the territory’s access to gas resources.
Albanese said the national standards would still establish a consistent framework while recognising that some jurisdictions have different circumstances.
The rules are expected to cover more than electricity. Large facilities will also face requirements relating to water use, infrastructure and community impacts.
The federal government intends to introduce legislation covering the standards in 2027.
The debate comes as billions of dollars in potential investment are being directed towards Australia’s data centre sector.
US artificial intelligence company Anthropic has separately expressed interest in developing up to five gigawatts of data centre capacity in New South Wales, according to internal government correspondence reported by the ABC.
That would represent more than three times Australia’s existing data centre capacity.
The scale of proposed investment has increased pressure on governments to establish rules before the industry expands further.
For Australia, the challenge is balancing the economic opportunities created by AI with concerns about energy prices, infrastructure and the environmental impact of large computing facilities.
The National Cabinet agreement is an attempt to establish that balance, although disagreements between Canberra and some states over energy policy are likely to continue as individual projects move forward.
