Recent policy decisions by the NSW Labor government are actively contrary to our energy security and emissions reduction targets.
Big tech makes some pretty big claims, and they’re only getting bigger in the advent of widely distributed so-called generative artificial intelligence.
Amid all the bluster and promises, big tech knows it has a big problem, but won’t scream loudly about it from product demonstration stages. Because while they promise us the moon or Mars (for a simple monthly subscription fee), they know it could end up costing us the earth.
The decision by Origin Energy to again extend the life of Eraring power station is a direct product of the NSW Labor government’s failures. Despite persistent warnings that NSW is already not on track to achieve our legislated climate targets, the NSW Labor government has continued on a business-as-usual trajectory. Recent policy decisions by the NSW Labor government are actively contrary to our energy security and emissions reduction targets.
We know that there are enough renewables and power lines on track to be delivered in time to replace Eraring in 2027, but new increased demand imperils system security requirements.
Australia’s energy demand, after years of reduction, has started increasing again. Last year, Australia’s total electricity demand reached an all-time high, surpassing the previous high recorded way back in 2008. And the Australian Energy Market Operator (AEMO), responsible for measuring and regulating the national electricity grid, is projecting growth to keep going up for years to come.
The reason we had seen total electricity demand decline below its 2008 record is because of the effort put in to make our appliances and buildings more efficient and with industry transitioning and changing. With a grid that continues to be underpinned by fossil fuels, more electricity demand means more fossil fuel demand. And so, coal-fired power stations remain open.
But why is energy demand increasing? Electrification of household appliances and the uptake of electric vehicles certainly play a role, but we knew that was coming and had planned for it. What has changed, recently and rapidly, is an explosion in highly energy-intensive data centre projects.
In Australia, according to a December 2025 report by the Clean Energy Finance Corporation, data centre operational capacity is expected to be between 2.2 GW and 3.2 GW by 2035, up from around 0.3 GW in 2024-25. This represents 8-11 per cent of Australia’s projected electricity consumption in 2035, up from around 1 per cent today, resulting from up to $135 billion in data centre investment.
Modelling conducted by Oxford Economics for AEMO backs this up, suggesting that in NSW the share of electricity used by data centres could rise from ~4 per cent to ~11 per cent of state demand by 2030, with similar jumps in Victoria.
“We’re entering bubble territory here, characterised by a drumbeat of ‘bragawatt’ announcements for massive AI infrastructure projects.”
It’s so bad that even the pro-business Australian Industry Group has sounded the alarm, writing to state and federal energy ministers at the end of last year warning that without an “urgent and immense” increase in new power supply to meet data centre demand over the next few years, coal-fired power stations would not be able to retire as planned, while price-sensitive businesses, such as metals producers, could be bid out of the market by less price-sensitive data centres.
This increased demand from data centres is flooding into an energy grid in which this highly polluting and emissions-intensive power station is operating for longer.
The Climate Change Authority singled out data centres as a key impediment to Australia’s ambition on reducing greenhouse gas emissions. Uncontrolled data centre growth could jeopardise NSW’s legislated 2035 emissions target.
So we can assume governments are taking a cautious approach to new data centre developments, right? Unfortunately not. NSW alone is home to around 90 data centres, and in 2025 approved or received state-significant development applications for 22 more.
When did we agree on this course of action? Where was the public debate and discussion where we weighed up the pros and cons?
“Data centres are the foundation of the AI revolution,” says NSW Treasurer Daniel Mookhey. “AI capability will expand … and NSW will be more competitive.”
On what evidence and public mandate are proclamations like this based?
My fear is that governments of all persuasions have been sucked in by a slick get-rich-quick scheme touted by big tech and supported by global capital with lots of money and few ideas.
There’s more than a hint of boosterism going on, and projects like data centres suit the needs of governments perfectly. Here you have a supposed solution to intangible issues and economic preoccupations like productivity, efficiency and growth, coupled with a big imposing physical structure that you can cut the ribbon on – or, in the case of the NSW treasurer, pour the final concrete for the external structure of a Macquarie Data Centre. But these promises of economic prosperity are far from a sure thing.
There’s a mad race on to invest in and build data centres, fuelled largely by US investment priorities seeking to cash in on the AI craze. We’re entering bubble territory here, characterised by a near-daily drumbeat of “bragawatt” announcements for massive AI infrastructure or data centre projects.
Every jurisdiction facing runaway data-centre growth has learned the same lesson the hard way: when governments allow development to race ahead without an integrated energy strategy, the public ends up paying the price. This time that price included the prolonged higher energy costs and detrimental impacts on our climate and environment from the extension of an ageing power station.
It’s not even that we need a better plan, it’s that we need a plan. At the moment, we’re driving in the dark and, rather than proceeding with caution, governments are choosing to put their foot on the accelerator. That’s reckless public policy.