Albanese to override Queensland to settle AI data centre energy rules

Topic:AI

David Crisafulli says Queensland will not support proposed rules requiring data centres to source power from renewables. (ABC News: Matt Roberts)

In short:

The federal government expects to settle new rules for how data centres use energy at Wednesday's national cabinet, despite opposition from Queensland.

The rejection of rules tying data centre construction to new renewables projects means the Commonwealth will be forced to legislate to override the state.

What's next?

National cabinet will also discuss the gun buyback scheme and the next stage of a national plan on family violence.

The federal government expects to settle new energy and water rules for massive AI data centres at a national cabinet meeting on Wednesday despite Queensland's opposition, forcing it to create laws that override the defiant state.

Queensland Premier David Crisafulli has sworn to stand his ground at Wednesday's meeting against rules that would require data centre projects to purchase their power from new renewable energy projects, backed by gas, so the energy-hungry facilities do not create more demand that would push up power prices.

The Queensland and Northern Territory governments say they will not sign on to a standard that ties data centres to renewable projects at the exclusion of coal and gas.

Energy Minister Chris Bowen had already flagged the federal government's intention to legislate so-called "causer pays" energy rules next year for big facilities, even if all states and territories signed on, allowing the Commonwealth to overrule dissenters and prevent data centre proponents from playing the states off against each other.

On Sunday, Mr Bowen said the government would find agreement with the states if it could, and legislate to ride over the top of those who opposed the federal government.

"The Queensland government's made their views pretty clear; we disagree with them, and we're proceeding without them," Mr Bowen said.

"Queensland wants to take an open slather approach, let data centres be data centres approach. We don't agree with that.

"We want data centre investment in Australia, but we want it to be in the best interest of Australians, and we're not going to let Queensland run a race to the bottom which would see energy bills go up and reliability go down because they want data centres at any cost.

Chris Bowen says the federal government will not let Queensland dictate the nation's energy policies. (ABC News: David Sciasci)

The federal Coalition is questioning how the Albanese government intends to grant itself powers to override Queensland's energy rules, saying that doing so could be unconstitutional.

"How is Chris Bowen going to nationalise this? What powers is he going to use? The fact now he is going to use desperate measures and probably unconstitutional measures to try and force Queensland and the Northern Territory to take a particular course of action is just absurd," Shadow Energy Minister Dan Tehan said.

"He hasn't been clear on what he wants to use. It looks like he is going to attempt to use the corporations power, which would bring with it all types of legal uncertainty.

Queensland to require community buy-in

The Queensland government says energy sources for data centres should remain technology-agnostic.

In a statement, Mr Crisafulli said his government would develop its own framework that ensured communities and local councils also had a say in data centre proposals.

Under Queensland's proposal, data centres would be required to provide a social impact assessment and a community benefit agreement with the relevant local council before lodging a development application, similar to reforms to how battery storage and solar farm projects are assessed in that state.

Mr Crisafulli said data centre deals must be done with the backing of councils and communities.

"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," Mr Crisafulli said.

The federal government wants data centres to bring their own energy supply to shield against a US-style populist backlash to such facilities.

Community resistance has mired construction in the US, where facilities have strained local electricity grids and caused anxiety in water-scarce communities.

Dozens of US data centre projects worth more than $US100 billion ($140 billion) have been blocked or delayed by local opposition this year, according to US group Data Center Watch.

The NT government opposes restricting data centres from using gas for power, given its resources in the Beetaloo Basin. (ABC News: Marcus Kennedy)

Settling minimum standards for data centres would also provide investors more certainty on what to expect when dealing with Australia.

While data centre energy demands are expected to triple in the next four years, the government estimates investment plans announced over the past three years alone could be worth more than $100 billion to the Australian economy.

Tying data centres to renewables would fuel backlash: Coalition

The federal government also hopes the new rules will help get more renewables projects over the line.

Many are struggling to reach a final investment decision despite the government underwriting them through the Capacity Investment Scheme, due to a lack of energy buyers willing to strike a Power Purchase Agreement that would guarantee demand for the projects.

At least nine of the renewables projects announced under the Capacity Investment Scheme have since withdrawn, and most projects that have won underwriting support are yet to reach a final investment decision.

Mr Tehan said the government was putting social licence for data centres in jeopardy by tying them to renewables.

"This policy on AI and data centres shouldn't be trying to make up for Chris Bowen's abject failures. The fact that he can't get renewable energy projects up shouldn't be an excuse for tying states and territories to this policy," he said.

"They're saying there needs to be social licence around data centres, but they're also saying, 'We're not worried about there being no social licence when it comes to renewable energy.' If you tie the two hand-in-glove together, it's going to lead to an even bigger backlash.

Dan Tehan says tying data centres to renewables could put the social licence for AI facilities at risk. (ABC News: Matt Roberts)

While the Coalition is at odds with government over its move to force data centres to run on renewables, the major parties are working to find common ground on a longer-term AI policy and the massive economic potential offered by artificial intelligence.

Last week, the major parties agreed to establish a dedicated committee to inquire into AI issues in the hopes of progressing some of those policy questions.

Mr Tehan said the Coalition wanted to work with the government on AI where it was in the national interest.

"We've shown that over the last fortnight when it came to reform of the NDIS, reform of media bargaining codes, so we will continue where it is in the national interest," he said.

"And given the importance of this sector going forward and making sure that it's established here in Australia in a way that works for everyone, especially those in regional and rural Australia, I think it is critically important, and we can work with government to achieve that.

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