Grid operators eye new rules for power-hungry data centres
Ryan CroppEnergy and climate reporter
Updated May 23, 2025 – 5.55pm,first published at May 22, 2025 – 8.00pm
The energy market operator has requested the grid’s rules be changed to properly accommodate a surge in data centres, the power-sucking assets that underpin the world’s shift to artificial intelligence.
With its request to the country’s electricity network rulemaking body, the Australian Energy Market Operator has warned that the grid’s stability could be threatened unless data centres’ power use is managed…..
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“The rise of artificial intelligence is driving unprecedented demand for data centres in Australia, with some facilities potentially requiring as much electricity as small cities,” said Anna Collyer, chairwoman of the Australian Energy Market Commission, which sets the rules. “This consultation is about future-proofing our electricity system.”
Data centre growth is expected to expand in coming years to meet demand for artificial intelligence and cloud storage technologies. Bloomberg
The increase in demand for AI processes, underpinned by data centres, comes as big coal power plants, which have underpinned the stability of the grid for decades, are nearing the end of their lives.
There was particular concern about “how large loads would behave during a power system disturbance, including whether the behaviour of these loads could act to worsen a disturbance through the impact on system frequency, voltage and stability,” according to documents made public by the AEMC.
In July, 60 data centres near Washington simultaneously dropped off the grid after a safety mechanism designed to protect computer chips from damage was triggered, causing a huge surge in excess electricity.
The incident occurred in Data Centre Alley, an area that houses more than 200 data centres and consumes the same amount of electricity as the city of Boston, which has a population of more than 600,000.
The AEMO has warned it has a lack of visibility over the energy use of data centres and requires powers to help avoid cascading failures throughout the system like the one that occurred in the United States. The powers would help data centres avoid sudden disconnections from the grid.
Bret Harper, an energy analyst at Reputex, said data centres often had settings that caused them to disconnect from the grid if the power quality – or frequency – dropped below certain levels.
“Should they do this at the same time, or unpredictably, it can exacerbate problems as the grid operator tries to stabilise [the grid],” he said.
A lot of data centres are very sensitive to having their systems up and running 24/7, no matter what – and they put a premium on doing that. They don’t want to be interrupted.”
Data centres tend to be located in areas where the grid is most stable, which is typically in major cities near homes and businesses.
“In specific cases, if the data centres want to use a lot of power when people want to use a lot of power, that can push the limits of how much power we can move around,” Harper said. “They may not occur often, but if you have a big power user that is not well managed, it could trip the whole system.”
From Macquarie to David Di Pilla’s HMC Capital, some of the country’s biggest investors are increasingly backing data centre projects, attracted by outsize returns and the infrastructure-like nature of the assets.
Electricity demand from data centres, which provide computing power and storage for software and data, could reach 8 per cent of Australia’s total by 2030, up from about 5 per cent now, and as much as 15 per cent in the most bullish case, according to separate analysis from Morgan Stanley.
Saul Kavonic, an energy analyst at MST Marquee, said the growth in the number of data centres and their demand for power needed to be matched by new sources of secure, round-the-clock electricity generation.
“Australia has had an energy advantage for many decades. If we want to maintain that advantage to set us up for a bright future in data centres, quantum computing and AI, we need to make sure we are addressing the supply side of this issue,” he said.
The consultation on rules for data centres came as the AEMC approved changes designed to speed up grid connections for new solar and wind power generation and battery storage projects.
Collyer said the new connection rules would help smooth the rollout of new renewables projects, which are crucial to meeting Australia’s 2030 climate targets.
“With renewable energy projected to triple by 2030 and utility-scale batteries to increase fivefold in the same period, these reforms will help reduce connection bottlenecks while maintaining system security,” she said.
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