AI Data Centers and The Coming Energy Policy Reckoning
The surging global demand for computing power, fuelled primarily by the proliferation of Artificial Intelligence (AI) and cloud services, is creating an unavoidable reckoning between the digital economy and energy policy. New hyperscale data centres require enormous amounts of dispatchable baseload power—electricity that can be supplied constantly, 24 hours a day, seven days a week.1 The pace of this digital infrastructure build-out is currently exceeding the capacity of nations like Australia and the United States to deliver new, firmed zero-emission generation and transmission infrastructure.
This timing mismatch risks either stalling vital economic growth or locking in higher emissions by forcing greater reliance on the least efficient, oldest parts of the existing grid. To manage this critical transition, a pragmatic, phased energy strategy is essential, one that utilises Gas Turbine (GT) technology as a low-cost, fast-build middle step while developing long-term, carbon-free solutions.
The Strain on Power Grids
The scale of the required energy capacity is immense. In the United States, data centre electricity consumption is projected to more than double from 2024 levels, potentially reaching over 400 Terawatt-hours (TWh) by 2030. In Australia, the National Electricity Market (NEM) faces a similar pressure point, with data centre demand forecast to exceed $12 TWh by 2030. This growth could see data centres consume up to 15 per cent of the total grid energy in high-density areas like Sydney and Melbourne.
The Limits of Intermittency
Current strategies focused solely on Power Purchase Agreements (PPAs) for annual renewable matching prove inadequate for the operational reality of hyperscale facilities. Data centres require real-time power certainty. When solar is unavailable and wind is slack, a facility running mission-critical AI workloads cannot simply curtail operations.
In the US, this mismatch is apparent in hubs like Northern Virginia, where utility companies struggle to connect new facilities quickly, often leading data centre operators to consider behind-the-meter gas-fired generation for guaranteed capacity. In Australia, the volatility of the NEM means that without a firm supply, the burgeoning digital load often relies on existing, high-emission thermal plants to maintain system security. This outcome undermines national decarbonisation targets.
Gas Turbines: The Necessary Transitional Bridge. To meet the immediate power needs of the digital economy and provide a stable foundation for increased renewable energy penetration, modern, high-efficiency Gas Turbines (GTs) offer a practical, interim solution.
Speed, Cost, and Stability
GT technology is characterised by its fast deployment timeline, often built and commissioned in months rather than the many years required for large-scale grid infrastructure or nuclear plants. This superior speed addresses the immediate time-to-market constraints for major data centre investors.
Furthermore, these units provide crucial firming capacity for the grid. Modern aeroderivative or heavy-duty GTs offer quick start-up and ramp-up times, which are essential for balancing the large, sudden swings in supply and demand caused by intermittent renewables and high-density computing loads. They act as a reliable 'bridge' to prevent the grid from leaning on older, less efficient, or more carbon-intensive alternatives during low-wind or low-solar periods.
Australia's Long-Term Strategic Advantage: Nuclear Power. While Gas Turbines provide the necessary speed and stability for the near term, they are not the ultimate zero-emission solution. The only proven, scalable technology that can provide 24/7, zero-emission baseload power is nuclear energy. This is where Australia holds a singular, strategic advantage.
Global Uranium Dominance
Australia possesses the world's largest known uranium reserves, accounting for approximately one-third of the global total. Currently, all this material is exported for use in overseas civilian nuclear power programs under strict non-proliferation safeguards.
A dramatic revision of domestic energy policy to permit nuclear power generation would allow Australia to use a fraction of its immense resource to secure its own digital future. Technologies like Small Modular Reactors (SMRs) are factory-manufactured and offer a smaller footprint with reduced construction times compared to traditional nuclear plants, making them ideal for integration into local grids or dedicated industrial parks. Companies in the US, such as Google and Amazon, are already pursuing direct power purchase agreements and investments with SMR developers, aiming for initial deployments in the late 2020s and early 2030s to power their data centre fleets.
Maximising Decarbonisation and Economic Benefit
A dual-path strategy, using Gas Turbines to bridge the timeline gap while pursuing nuclear energy development serves both national security and global climate goals.
The GT bridge prevents immediate energy shortages and manages the grid stability challenges that would otherwise force data centre developers to bypass Australia. This secures crucial investment and job creation. Simultaneously, the adoption of nuclear power provides the ultimate zero-emission, high-capacity baseload that the digital economy demands.
Furthermore, a domestic nuclear industry would strengthen Australia's role as a responsible global supplier of fuel, enhancing its ability to influence non-proliferation standards while contributing to global decarbonisation by providing clean fuel for power generation across the globe. This policy shift is not merely regarding domestic energy security; rather it is about leveraging a unique mineral endowment to capture a significant economic opportunity and assert global energy leadership.
Policy and Regulatory Imperatives
To realise this phased strategy, a clear and decisive policy framework is required:
Immediate GT Integration: Government and regulatory bodies must establish clear pathways for the rapid deployment of modern, efficient Gas Turbines for data centre firming and grid support.
Rethinking Nuclear Policy: The long-standing legislative bans on nuclear power generation in Australia must be addressed to allow the necessary planning and regulatory development for SMR technology. This provides certainty for long-term investors.
Forward-Looking Planning: The Australian Energy Market Operator (AEMO) and the Australian Energy Market Commission (AEMC) should consider a timeline for both the GT bridge and eventual nuclear deployment into the long-term Integrated System Plan (ISP), guiding infrastructure investment towards a firmed, zero-emission outcome.
By acting now with a pragmatic, phased approach that utilises Gas Turbines as a temporary stabiliser and commits to nuclear baseload, Australia can secure the essential infrastructure for its digital future while maximising its global influence in the fight against climate change.
Data Centres need clean power. Renewables alone cannot meet the demand.
