VIDEO: Should data centres fund their own power generation?

JACQUI GLOVER, WEST FOOTSCRAY RESIDENT:  This is just looming over us 24 hours a day. You just can't escape it basically. You just can't get away. We look out the window there and we see it. We look out the window there, we see it.

Would you like to come out the front and I will show you?

MIKE LORIGAN, REPORTER: Okay. 

JACQUI GLOVER:  There it is.

MIKE LORIGAN:  In this pocket of West Footscray, residents have a front row seat to the construction of a mammoth data centre.

JACQUI GLOVER:  It's just so imposing in every single way. It makes me a bit sad actually.

MIKE LORIGAN:  Data centres are large facilities filled with servers and IT infrastructure that process our digital lives.

BELINDA DENNETT, DATA CENTRES AUSTRALIA:  If you think about what you do in your daily life on your phone, on a computer, when you are out and about using public transport, it's all digital services that require a data centre to run them.

MIKE LORIGAN:  This is one of more than 250 operating in Australia, facilitating the overwhelming demand for AI and cloud computing. 

DANNY PEARSON, VICTORIAN ECONOMIC GROWTH MINISTER:  I think data centres will be to the 21st century, what the rail lines were to the 19th century. 

ROB HAMMOND, TBH CONSULTING: This is really sort of the fourth industrial revolution.

MIKE LORIGAN:  And that revolution is fuelling a race to secure a slice of the hundreds of billions of dollars being invested in the sector globally.

CRAIG SCROGGIE, NEXT DC CEO: In 2026, the top four hyperscale companies, Microsoft, Amazon, Google, and Meta have estimated they will invest more than 680 billion US in digital infrastructure and AI.  It is a unique moment in history.

MIKE LORIGAN:  But AI data centres have also been described as ‘energy vampires’. The huge amounts of electricity and water required to power them, has turned it into a hotbed issue in the US.

DONALD TRUMP, US PRESIDENT: AI data centres cannot drive up prices, electric prices in communities. We told them you have to build your own power plant. 

BELINDA DENNETT: Australia's a really favourable market. We have availability of land, and we have an abundance of renewable energy, which is what customers want to power their data centres, clean energy.

MIKE LORIGAN:  Ninety per cent of data centres in Australia are in Sydney and Melbourne and currently there is a race on to secure more.

Are you the most popular data centre CEO in Australia right now?

CRAIG SCROGGIE:  I think anyone in digital infrastructure right now is playing an important role at the most important transition in history.

MIKE LORIGAN:  This is zoned industrial.

JACQUI GLOVER:  Yes, true. 

MIKE LORIGAN:  What did you expect would be here?

JACQUI GLOVER:  We were sort of expecting that it might be light industrial, maybe manufacturing. There are other businesses in the area who are absolutely fantastic to deal with.

MIKE LORIGAN:  This facility is expanding and will essentially double in size in two years.

CRAIG SCROGGIE:  This will be one of the largest standalone sites in the country. Certainly, the largest in Victoria today, more than 225 megawatts of IT power here.

MIKE LORIGAN:  What sort of community consultation was there prior to this?

JACQUI GLOVER:  Not a lot. I would say minimal.

MIKE LORIGAN:  Next DC, one of the sector's biggest players in Australia, recently secured development approval, to build an almost $1-billion AI factory on an existing industrial site in Port Melbourne.

It took just 75 days.

CRAIG SCROGGIE:  In terms of time and frequency, we are very, very engaged at the planning level with the planning ministers.

When we need access to them to discuss the size of the opportunity and planning requirements, we just make the request and generally they're very, very happy to support what we're doing.

MIKE LORIGAN:  As Victoria’s Economic Growth Minister Danny Pearson has been aggressively selling the state to the industry to lure big data centre investment. The state has 40 data centres right now, 11 have been fast tracked.

What advice have you been given about how many data centres Victoria can absorb?

DANNY PEARSON:  I don't recall receiving any advice as to a specific number. I think from my perspective, this is about working with industry to, because industry will make a determination as to what they think is in their commercial interests to invest.

MIKE LORIGAN:  The new peak industry body, Data Centres Australia, says the US market, where 80 per cent of the world’s data centres are found, is at its limit. 

BELINDA DENNETT:  The big US companies are starting to look around the world for where they can put this compute.

MIKE LORIGAN:  In the States, big tech firms recently signed a pledge at the White House to bear the cost of powering new AI data centre projects.

Should data centres fund their own power generation?

DANNY PEARSON:  I don't believe we are there. I think like most commercial or industrial users, they don't tend to have to do that themselves.

MIKE LORIGAN:  What is the energy bill of this room?

CRAIG SCROGGIE:  When you're talking about site scale at more than a hundred megawatts, your energy costs are tens of millions of dollars.

MIKE LORIGAN:  In Australia, the amount of energy consumed by data centres from the national grid is expected to triple by 2030.

Rob Hammond warns there are too many data centres in the pipeline in Australia and not enough power. 

ROB HAMMOND:  The bottleneck that we've got at the moment is really the infrastructure that connects the generation in the rural areas to the metropolitan areas. 

There is a willingness that's been stated by a number of data centre operators to invest in renewable generation infrastructure or the transmission infrastructure to connect it.

MIKE LORIGAN:  Are we likely to see more pressure being put on energy bills as a result of the increased number of data centres?

CRAIG SCROGGIE:  The data centres themselves won't cause an increase in energy costs. The transmission component, the signing of more than 70 per cent of data centre loads today are fully offset through a power purchasing agreement for solar and wind developments. 

Data centres increasingly as they get larger, will actually provide grid stabilising battery support to the national electricity market.

MIKE LORIGAN:  This facility needs power 24/7 and there are contingencies if it doesn’t get it.

CRAIG SCROGGIE: Essentially the power that the generator is the first or last line of defence. We can proactively go off the grid. So at any point in time, the energy authority can call us and say, could you please take the data centre off the grid like a grid firming battery.

MIKE LORIGAN:  Forty diesel generators currently provide a backup when the energy grid is overwhelmed. That number will increase to more than a hundred once the expansion of this data centre is complete.

Does this increase in demand for data centres and their consumption of energy, will that mean that people's power bills could go up into the future?

DANNY PEARSON:  Look, I don't believe so. 

MIKE LORIGAN:  Have you received any advice to tell you that they won't?

DANNY PEARSON:  But no, I haven't received advice would indicate. 

MIKE LORIGAN:  Do you share any responsibility in communicating the impact of these projects, these investments, could have on Victorians?

DANNY PEARSON:  I think at the moment in relation to the usage the data centres have in terms of the entire energy grid, they're relatively small as a user of power relative to other users.

MIKE LORIGAN:  The federal government is currently finalising a set of data centre principles with the states set to be released in the first half of this year, under its national AI plan.

A plan expected to establish standards for a growing industry.

CRAIG SCROGGIE:  The digital infrastructure is needed just like an airport needs to handle the volume of passengers that want to travel. Over time, digital infrastructure purely gets built to directly support the user's needs.