Bring your own power? The energy rules set to shape Australian data centres

Data centres have been part of Australia’s infrastructure and essential for digital services for more than two decades. Until recently, though, they were rarely high-profile public infrastructure.

That has changed. Growth in AI and cloud services is driving proposals for larger facilities with much larger electricity requirements, bringing data centres into sharper focus not only as digital infrastructure, but also as significant energy infrastructure.

Australia wants the investment, capability and jobs that data centres can bring. But the political debate is also converging on a basic principle: Australians do not want new data centre demand to leave other electricity users paying more or facing a less reliable grid.

That principle is now moving from policy into legal architecture. A national framework is being developed, the Australian Energy Market Commission (AEMC) has opened consultation on how large loads should pay for network augmentations, and New South Wales and Victoria are building energy requirements into their own planning and approval frameworks.

From broad expectations to proposed national standards

The Australian Government’s National AI Plan, released in December 2025, identified advanced data centres as part of the infrastructure needed to build Australia’s AI capability.

In March 2026, the Government published its Expectations of data centres and AI infrastructure developers. The Expectations stated that new and expanded data centres should secure new and additional clean generation or storage, cover their share of network infrastructure costs and support the grid through demand flexibility. The Expectations did not themselves become law, although the Commonwealth stated data centre development projects aligned with them would be prioritised in regulatory assessments.

The Government then announced in July that it would legislate national AI standards. Following National Cabinet in August, its September consultation paper proposed mandatory minimum requirements for large data centres, intended to complement rather than replace state and territory planning, energy, water and environmental regimes. Consultation closed on 9 October 2026, with legislation intended for early 2027. A parallel Senate Environment and Communications References Committee inquiry into AI and data centres, whose recommendations may also inform the national standards, is now due to report by 23 March 2027.

How much of a data centre’s electricity usage must be met by new renewables?

The Commonwealth’s proposed model is that a large data centre  would offset its operational electricity consumption with 100% new renewable generation, supported by adequate firming. Firming could include storage or gas-fired capacity, but gas would not ordinarily replace the renewable generation requirement. In practical terms, the Commonwealth’s consultation paper contemplates that:

• a data centre would retire renewable energy certificates under the Renewable Electricity Guarantee of Origin (REGO) scheme equivalent to its annual electricity consumption;
• some certificates could initially come from existing renewable generation and storage, with the share sourced from new capacity ramping up over time,
• renewable energy matching could be timed to particular periods, such as peak periods.

Queensland and the Northern Territory opposed the renewable energy requirement when national Energy Ministers considered it on 28 July, although all other ministers agreed to progress it. After National Cabinet in August, the position was briefly reported as a carve-out allowing those jurisdictions to use coal or gas. The Commonwealth subsequently said there would be no automatic exemption. Instead, the Commonwealth’s consultation paper proposes that a data centre buying electricity from a state-owned operator could apply to the Australian Energy Regulator to modify its renewable electricity requirement, if it can show that its alternative energy mix would deliver clear benefits for grid stability and lower prices for customers. Energy Minister Chris Bowen has said that the threshold would be very high and that the Commonwealth would have the final say.

How would the renewable energy obligation work?

The AEMC’s July advice to Energy Ministers provides the clearest blueprint so far, although the AEMC describes it as high-level advice based on preliminary analysis and says further work is required.

The AEMC recommended a package of four measures, which it suggests could be applied in stages to data centres above a size threshold. Under the package, data centres would:

• surrender REGO certificates linked to new renewable generation to offset their electricity use;
• contract for enough firm capacity to support their demand;
• register as market participants, improving visibility and providing a regulatory mechanism for the firming obligation; and
• be encouraged, through streamlined connection agreement processes, to support demand flexibility and to locate efficiently or co-locate with generation.

The AEMC also considered the timing mismatch between constructing a data centre and bringing new generation online. Its advice contemplated temporary access to certificates from existing renewable generation, followed by additional certificate surrender in later years. The final approach to additionality, matching periods, transitional relief and responsibility between operators and major tenants remains to be settled. The AEMC has also recommended that any changes not apply retrospectively. Its indicative timeframes, which have not been consulted on, run from the point at which governments trigger the process: about 12 months for a certificate obligation to become operational and 24–36 months for the wider package of rule changes.

There is therefore no completed national energy obligation yet. But the likely direction is more specific than simply signing a “green” electricity contract. Compliance may require developers to coordinate PPAs, REGO procurement, firming arrangements, market registration and their connection terms.

Connections and network costs are part of the picture

The energy obligation is only one part of the AEMC’s work.

On 24 September 2026, the AEMC opened consultation on two rule-change requests to the National Electricity Rules dealing with the recovery of network augmentation costs caused or accelerated by data centres and other large loads. The consultation considers:

• potential gaps including upstream transmission costs triggered by distribution connections,
• stranded-asset risk where forecast load does not proceed or ramp up as expected,
• shared augmentation for clusters of large loads,
• information about prospective demand; and
• jurisdictional scheme costs for transmission-connected customers.

Separately, the AEMC is finalising new technical connection standards for large inverter-based loads, including data centres. Its March 2026 draft rule would require large data centres to stay connected through specified voltage and frequency disturbances (known as “ride-through”), rather than disconnecting from the grid, and to recover power within defined timeframes. The proposed standards would largely align with those used or proposed in Texas, Ireland and Finland, and connection agreements would bind data centres that are not registered market participants to their performance standards. Citing the complexity of issues raised in submissions, the AEMC has extended its timetable and now expects to publish its final determination on 29 October 2026.

Together, these workstreams indicate that large data centres are increasingly being treated not as passive electricity customers, but as significant participants whose location, technical behaviour and demand profile can affect the wider electricity system.

NSW, SA and Victoria are already moving

The NSW Data Centre Guidelines, released in August 2026, provide the most detailed state model. They expect projects seeking the streamlined assessment pathway to fund additional energy supply through long-term PPAs and firming arrangements. The Guidelines include specific measures concerning additional generation, wind and storage, project ramp-up and contract duration.

NSW has separately consulted on proposed electricity reforms including entry bonds, a Major Network Upgrade Fee and requirements to use connection agreements to reinforce PPA, firming and demand-reduction commitments. The proposals would apply to data centres with a rated connection capacity of 15MW or greater.

Those proposals are intended to be implemented under the Electricity Infrastructure Investment Amendment Bill 2026, which was introduced into the NSW Parliament on 5 August 2026. The Bill would allow the NSW Energy Minister to declare “large load infrastructure access schemes”, authorising or prohibiting access to specified network infrastructure for connections of 5MW or more, in a similar way to the access schemes used for renewable energy zones. The Bill passed both Houses of Parliament on 14 October 2026 and is awaiting assent.

Victoria’s September 2026 Sustainable Data Centre Action Plan takes a different approach. It expects data centres to offset their actual operational electricity use through new renewable generation and storage, pay directly caused connection and augmentation costs, provide demand flexibility where commercially and technically possible, and meet energy-efficiency requirements. Detailed verification and firming requirements will be developed with the Commonwealth standards.

Victoria also intends to create a dedicated planning category for data centres and make VicGrid a referral authority so grid impacts are considered through the planning process. Pending formal amendments to the Victoria Planning Provisions, the Minister for Planning has issued an interim Statement of Expectations that already applies to data centre permit applications lodged on or after 23 September 2026. Its Plan therefore links energy strategy directly to site selection and development approval, rather than leaving it solely to the connection process.

South Australia is taking a third approach. Its June 2026 Data Centre Strategy foreshadows a dedicated Data Centre and AI Infrastructure Act, which would give qualifying projects essential-infrastructure status and route major approvals through the state’s Coordinator-General, alongside a requirement that developers match demand growth with new, firmed supply. The Bill has not yet been introduced to the South Australian Parliament.

Tasmania has also released draft, non-statutory Expectations for Data Centres and AI Infrastructure Developers (September 2026), taking a lighter-touch approach that relies on existing approval pathways.

What this means for development

The emerging requirements will not sit in one document. Depending on the final national rules and project location, they may operate through Commonwealth legislation, the National Electricity Rules, registration requirements, planning approvals, connection agreements, PPAs, firming contracts and certificate arrangements.

All those pieces will need to align. For developers and investors, that makes energy strategy, regulatory approvals and stakeholder engagement early project-development workstreams, rather than matters to be addressed later. Governments will also need to provide clear and, as far as possible, consistent requirements across jurisdictions. The renewable energy rollout demonstrates that fragmented approval regimes and inadequate community consultation can delay projects and weaken investor confidence. Applying those lessons to data centre development will be important if Australia is to capture the investment opportunity while appropriately managing grid, environmental and community impacts.

The withdrawal of Firmus Technologies’ proposed ASX listing in October 2026 also illustrates the financing and execution risks associated with the sector’s rapid growth. Firmus, an infrastructure developer and operator, withdrew the proposed listing after investor concerns emerged about its valuation and ability to deliver its planned expansion. The episode highlights the scrutiny that investors are applying to the assumptions underpinning major data centre developments.

Hive Legal’s specialist energy team advises on energy regulation, network connections, renewable energy projects, PPAs, storage, firming and electricity supply arrangements. We are closely following the national and state frameworks as they develop.

This article reflects developments as at 23 October 2026, and the national and state frameworks it discusses are still being developed and changing quickly.