NEWS
The National AI Plan
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On March 23, Australia’s Department of Industry, Science and Resources published the National AI Plan. The plan outlines the Government’s views and objectives so that the benefits and opportunities afforded by Artificial Intelligence (AI) are provided to all citizens and local businesses. The plan includes funding for the Cooperative Research Centres (CRC) Program that is part of the AI Accelerator initiative kick-off that aims to support businesses and researchers commercializing their AI efforts and collaborate with AI companies to “strengthen our national AI capabilities.” Included in the National AI Plan is the expectation that hyperscalers and neoclouds enable Australian startups, small businesses, researchers, and non-profits to access the compute power on favorable terms.
As seen with the Online Safety Amendment (Social Media Minimum Age) Act 2024, the Australian Government is taking an active role in both maximizing the benefits and minimizing the downside of the developments in the digital economy. Included in the National AI Plan is an entire section outlining expectations regarding data center operators. Australia is an interesting case to pay attention to regarding how governments reconcile, especially in warm climates, the commercial needs of data center operators, local businesses, and the local population. In Australia, like elsewhere, there are concerns about the impact that the increasing number of data centers is having on the electricity grid and the water supply, as well as the issue of data center clusters increasing the air temperature in local areas, referred to as heat islands.
IMPACT
An Opportunity Requiring Careful Management
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The two largest data centers in Australia are MEL2 in Melbourne (requires 354 Megawatts (MW) of power) and SYD3 in Sydney West (320 MW), both operated by Sydney-headquartered AirTrunk. Plans are afoot for much larger data centers, including the Mamre Road Campus in Sydney (1 Gigawatt (GW)) and another in Sydney NEXTDC S7 (550 MW) that is planned to be a "sovereign AI infrastructure" hub. NEXTDC and Macquarie Data Centres are local data center operators that work with both the Australian Government and enterprise customers, while another, CDC Data Centres, specializes on meeting the needs of the Australian Federal Government and Defence.
The energy challenge in Australia, according to the Australian Energy Market Operator (AEMO), is that data centers will account for between 8% and 15% of Australia’s energy needs in 2030, up from 5% in 2024. The fear is that data centers’ needs exceed the capacity of local substations and increase electricity prices. The Energy and Climate Change Ministerial Council is the branch of Government involved in ensuring that the needs of all stakeholders are considered prior to approving proposals for new data centers. To be approved, proposals need to outline how new data centers cover their share of transmission and distribution infrastructure costs, and provide evidence that the data center will curtail their demand on the grid during grid emergencies such as heatwaves. For its part, the Australian Government is supporting data center operators with a 500 Kilovolt (kV) transmission project (Sydney Ring South (Transgrid)) and expediting the construction of new substations.
Water usage is a contentious issue in Australia with the authorities needing to balance the needs of farmers, residents, local businesses, and the needs of data centers to cool their operations by drawing on the local water supply. Furthermore, local concerns include that the increase in water usage lowers the water table in the immediate area of data center clusters in Sydney, putting a strain on the infrastructure to retain supply.
The third major concern is heat, with reports that, during heatwaves, as fans operate in data centers to remove heat from the facilities, it raises temperatures in the immediate area and, at night, the roofs and walls of data centers radiate heat. These areas are often referred to as heat islands and the impact is increased energy bills for local residents due to the increased use of air conditioning units, along with heat-related health risks for residents, and additional strain on the local energy grid. Thermal Impact Assessments will become part of the application process.
Established in 2024, Data Centres Australia looks to represent local data center developers and operators, as well as companies like AWS and Microsoft.
RECOMMENDATIONS
A Thriving Ecosystem Is Developing
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Challenges foster innovations. In Australia, many firms have been created to meet both the needs of data center operators and the expectations of the Australian Government.
To limit the strain on local energy grids, data center operators can invest in Uninterruptible Power Supply (UPS) systems and Battery Energy Storage Systems (BESSs) from local firm Stor-Energy, as well as establish microgrids. Power Usage Effectiveness (PUE) will increasingly be a focus for operators and authorities. AirTrunk incorporates PUE into its data center designs and develops its own cooling systems. Sydney-based Temperzone has developed chilled water fan coils that form part of efforts to cool data centers and NEOtech Coatings provides "Cool Roof" coatings to mitigate heat transfer.
The Australian Government has stated that it expects data center operators to prioritize non-potable water (recycled or harvested rainwater) and disclose their Water Usage Effectiveness (WUE), which is a metric that determines the number liters of water used per Kilowatt-Hour (kWh) of Information Technology (IT) power. Data center campuses, such as in Western Sydney, are installing on-site treatment plants to treat and reuse "greywater" and pipe the recycled water to support cooling functions. In addition, operators can change their cooling processes to immersive cooling, submerging servers in a non-conductive "dry" fluid with Firmus focusing on this technology and DUG Technology developing immersion-cooling tanks (DUG Cool). Companies, including Microsoft and Google, have published “Water Positive Goals” and ABI Research expects more firms to do so in the coming years.
The externalities of the AI boom will increasingly require governments in warm climates to develop plans to limit the downsides of data centers. The plans should also form part of how they tackle climate change going forward.
