Beyond expectations

The federal government’s new ‘Expectations of data centres and AI infrastructure developers’ are just that: expectations.

They’re not new energy rules, but rather “signals” that would need to be implemented through the Energy and Climate Change Ministerial Council before they can have teeth.

The government expects data centres to “pay their full share of new grid connectivity so costs are not passed to consumers or businesses”.

But as lobby group Data Centres Australia says, data centre operators in Australia are already required to pay 100% of their connection costs and upstream transmission under the National Electricity Rules. It's who will pay for augmentation that's under question.

Australia's announcement comes after America’s big tech firms signed a pledge in the White House that was big on promise but actually voluntarily commits them to grid support that regulators have failed to design into law, making it unenforceable.

Data centres in the US are contributing to power bill increases. Whether they do so here remains to be seen.

Experts say if Australia gets it right, data centres connecting to the grid will help reduce costs for other users of the network. If regulators and policymakers get it wrong, grid augmentation costs could end up being passed onto retail customers or data centre developers could look to other countries. Off-grid options could become more attractive meaning any opportunity for grid support is lost.

Not all data centres are the same

At the heart of the challenge for everyone is the rapidly evolving nature of Australia’s current data centre boom.

When rule maker the Australian Energy Market Commission last week set out its proposal for new grid access standards designed to support system security, it suggested a new classification of a large load as 30MW or above - significantly higher than the current threshold of 5MW or greater in AEMO’s System Strength Impact Assessment Guidelines.

There’s no distinguishing between a large data centre that utilises a BESS, similar to that recently announced by data centre giant Airtrunk, or one that purely relies on dozens of diesel backup generators to support it when needed but siloed from the grid.

The rule change would not be applied to existing data centres, nor to data centres connecting at the transmission level (where separate rules already apply).

Data curated by consultants Oxford Economics Australia shows data centres already under construction and planned are in many cases well above 30MW.

Work by Oxford Economics underpinned the scenarios for data centres included in AEMO’s Draft Integrated System Plan. Since it did that work, data centre development has continued to grow.

A spokesperson for Data Centres Australia told The Energy the sector supports regulatory changes that have grid stability in mind.

They added that “The final rule must be technically achievable, commercially workable, and calibrated to real system security risk, not worst-case assumptions.”

Distribution versus transmission

Worst-case assumptions are being knocked back in Victoria right now, where the monopoly distribution networks are currently in a tussle with the regulator over revenue requests, including those related to augmentation to support data centres.

As the connection queue gets longer in data centre heavy Sydney, Victoria could become a more attractive destination.

In that state, CitiPower, Powercor and United Energy (CPU)’s combined network area hosts 85% of all operational data centres in Victoria, and covers a big chunk of the likely data centre development sites.

The Australian Energy Regulator has so far denied any requests for augmentation related to data centres that are not committed, or aligned with forecasts prepared by the market operator. So CPU commissioned Mandala Partners to offer an alternate estimate of the likely capacity required based on forecasting the likelihood a data centre connection request will firm up. It then reduced the capacity request from the original by 20%.

It also shows a growing number of data centres lining up in the 100MW+ category.

Oxford Economics expects large hyperscaler projects in Melbourne will more likely connect to the transmission rather than the distribution network. Indeed, the ISP requires the growing costs of transmission to be shared across a bigger connected load.

Given the contention over augmentation costs by distribution networks being passed onto retail consumers, there’s a case to be made that larger data centres should be required to connect to transmission where the costs would be borne entirely by the data centre operators.

The UK Government is currently consulting on ways to fix the current 7-10 year backlog on connection requests that is hitting data centres hard. This “first ready, first served” proposal also includes a plan to require workload flexibility to reduce demand during peak times.

Meanwhile, the government’s ‘expectations’ hint at ensuring genuine data centre operators that are able to flexibly support the grid are prioritised in the queue for connection. Turning that ideal into regulation should be at the top of list for energy ministers.