Senate Environment and Communications Legislation Committee, , 2:54:00 to 3:03:26
The committee examines proposed legislation for data centers, focusing on requirements for new renewable generation and ensuring these facilities do not increase electricity prices for consumers.
Topics: Data centres, Renewable energy, Electricity grid
Speakers: Hon Tim Ayres, Steph Hodgins-May, David Earl, Speaker 13, Unknown Speaker
>> thank you chair. Uh to Minister Ayres, in May estimates you confirmed that data centers would have to produce additional renewable energy, not just cover their own load to which we were quite um complimentary of. But on the 5th of August, Minister Bowen said it was a cause a pay system where data centers only had to cover their costs on the grid. But then on the 26th of August, the prime minister changed the policy so that coal and gas could power data centers. But then the next day, the energy minister said, "No, no, only after the Australian energy regulator has approved that coal and gas is cheaper than renewables." So what is the policy that will be presented in the legislation?
>> Well, the the legislation when it hits uh the parliament will um on the energy questions be um designed to achieve uh a number of objectives. The most important objective here is that what while while data centers themselves are important bits of national infrastructure, right? Just the same as a bridge or a road. Um uh everybody here who checked their phone um before they got up out of bed this morning would have engaged the services of at least one if not more data centers. Everybody's posted a meme or asked a question will will have will have used. I mean I just made the point it's important infrastructure um uh for large data centers uh of which there will be more investment in those uh in those pieces of infrastructure. This legislation will use national rules to make sure that those investments don't push up the price of electricity, which is what has happened in other jurisdictions. Um, a lack of kind of planning and a regulatory framework has meant that there's more customers for the same amount of electricity um, uh, generation and transmission infrastructure. So, number one, lower costs. That's what it's designed to do. Number two, uh, ensure that data centers procure new renewable generation, adequate firming, um, demand flexibility in terms of their own operations just the same as uh, uh, Senator Roberts and I were talking about the Tomago aluminium facility. it is required to have the capacity to be able to flex its demand to give the grid more um stable capacity. Um so there are a number of of objectives. >> Is your answering of course is your
answer different to your May answer that they would um be required to produce additional renewable energy not just to cover their load.
>> That's right. you stand by that there will there will be a requirement to as I uh to procure new renewable generation. Um of course um there is a requirement for firming there too. Gas and hydro and other things play a role uh in uh firming in our electricity network. But uh the the principle here is that uh large data centers bring their own uh and that that supports the development of the electricity network and produces lower costs rather than higher costs which would be the outcome if we don't legislate a framework to require that.
>> Will data centers be able to be built and connected before associated renewables have been built?
there uh these um these matters uh are of course the subject of uh the government's deliberations on these questions um uh in the leadup to new legislation being introduced as the prime minister as indicated uh will be introduced um shortly to uh the parliament. Uh there's a range of proposals on duration and firming. Um and uh we will uh we will be very transparent. Um there is a parliamentary process that's engaged about those issues. Now um uh uh the legislation will arrive in the parliament. Um
>> is this something perhaps officials can um enlighten us on further?
>> Questions around um the the transition arrangements um will be dealt with very adequately then if officials have got anything that they can add u I'm very happy for them
you just add senator a number of these questions are under consideration by by by cabinet at the moment in the context of the legislation that the minister
>> Okay. So there's there's no we can't rule out that data centers won't be built before renewables have been built.
>> Well, we're in the middle of a of a of a you know cabinet deliberations on those questions which has been it's not a secret you know we we have been very clear uh about these and we've been engaging across the parliament uh on these questions as well. the it's uh there are some as you indicate important principles involved here uh and we want to see this deliver lower cost and help build out a modern electricity network.
>> Yeah, look um if if there is significant community concern as I'm sure you're very well aware um that if data centers can be connected um before we will see households and businesses pay extra costs and put upward pressure on prices. Are you is the government assuring us that there will be nothing in this data center kind of scale up that will stop bills going up?
>> Everything in the design of the regulatory framework that we bring to the parliament will be about delivering precisely that. of course as as you would know um we we came to government in 2022 against a backdrop of no investment in the electricity network. The principle here if we're if we're bringing not just in data center terms but in industrial electricity terms in household electrification in all of the objectives that we want to grow the economy to re-industrialize the economy uh to make the economy more efficient and productive requires more and more electricity. It is yes data centers are um big uses of electricity but they are not the only ones. We've just spent some time traversing
>> I'm aware of
>> what's been going on in the smelting sector for example where lowcost electricity is really important. We have to build and build and build and build >> uh in order to meet those objectives uh in the in the electricity network and there will be data centers that that are required for our national economic development and for our resilience uh that will be large users of electricity and this policy is designed to make sure that they pay their own way. And if
Queensland can use coal and gas for data centers, will this lift prices for everyone on the east coast or just Queensland energy users and open to the department as well?
>> Senator David, acting branch head um and head of the data center energy task force. U so the way u minister Bowen has articulated the I guess what was discussed at national cabinet for a data center to I guess qualify for the exemption. So data centers will be required to surrender RIGO certificates to offset their demand. Uh but if they procure power from a state-owned uh electricity provider and that's in a state that predominantly is a stateowned system, they can apply to the aeer so the Australian energy regulator to seek an exemption from that requirement. But to be granted that exemption, they have to demonstrate that that contract has benefits overall for system reliability and it's cheaper for consumers overall. So it's not that the data center itself gets cheaper prices, it has to be cheaper for consumers overall. So if they can't meet that requirement, then they would still have to surrender the the renewable energy certificates.
Um, Clean Energy Finance Corporation and Binga released analysis showing data centers not covering their energy demand with um, new renewables will push up power prices by 26% in New South Wales and 23% in Victoria. Do you know what the price impact will be by allowing them to build renewables after they've already connected to the grid? Is that something that you're considering and you've got any modeling on as part of the these this process? But I think as I
said earlier, Senator, that those matters are under active cabinet consideration at the moment. So there's there's not much we can add.
>> Not full of confidence um with that response. There's not there's no more information around.
>> There's no more information we can provide at the moment.
just a moment.