Should we make data centres build their own energy?

Concerns raised by North Shore locals about data centres have been echoed by national industry and environmental groups, who are now calling for strong federal guardrails on the data centre boom.

What happened: Across Australia, there are now more than 250 data centres. Many of these can be seen in urban areas like the North Shore in areas like Gore Hill, Macquarie Park and North Sydney, with more on the way. 

• Locals have raised issues with new data centres being built, such as those in Lane Cove and North Ryde, citing concerns over water and energy usage, as well as impacts on nature.

Why the rush? The data centre boom is largely attributed to the rise in AI computing. This technology requires a lot of infrastructure, power and cooling.

What now: The concerns of North Shore residents have now been reflected in a proposal put on the desk of federal Industry Minister Tim Ayres, written by a coalition of industry, union, environmental and community groups. 

• Alexander Hoysted, the convenor of these groups, told the Lorikeet that while data centre investment can be a boon to our economy, strong federal guidelines are needed to prevent “a race to the bottom, to see who can just open their arms to the most industry”.

Among the coalition’s eight proposed guardrails is the demand for data centres to be powered by 100% additional renewable energy.

Why? While data centres can theoretically operate on 100% renewable energy, there are no rules forcing them to. 

When data centres with large energy demands join the grid, they only push the goal of a net zero economy further down the line. The federal Climate Change Authority says our emission targets are being weakened by the influx of data centres.

So how do we ensure data centres are powered with renewable energy? One suggestion is the use of Power Purchase Agreements (PPAs).

What is a PPA? A PPA is a long term contract between an energy supplier (a wind or solar farm) and an energy buyer (a supermarket, a local council, heavy industry or a data centre).

Here’s a real example: the City of Sydney Council has a PPA with Flow Power. There obviously aren’t kilometres of extension cable connecting the council to a wind farm. What does happen is Flow Power puts the exact amount of energy the council uses back into the grid. 

How it's used: Entering into a PPA means whatever energy is used by a data centre will then be replaced on the grid by renewable energy. 

If a data centre enters one of these agreements with a renewable energy supplier, the supplier then has the guarantee of a long-term customer, meaning they can invest in – for example – a new wind farm.

The end result: New data centres will come with corresponding investment in Australian renewable energy.

• When asked last week whether data centres should be forced to take part in such a scheme, federal energy Minister Chris Bowen would not comment but pointed to national data centre principles currently being developed by the federal government and due for release this year. 

In December, federal Minister for Industry Tim Ayres suggested these principles will require data centres to invest in “renewable energy generation and water sustainability”.

We asked both Ayres and Daniel Mookhey, NSW Treasurer, what they thought of the proposed guardrails put forward by the industry coalition. Neither would confirm whether they had seen them.

Image: Hc Digital on Unsplash