Understanding the Impact of Data Centres on Australia’s Energy Market

Eight Actions Energy Users Should Take Now

The Australian Energy Market Commission (AEMC) has released its Detailed Policy Assessment: Advice on Data Centre Regulatory Pathways, outlining how large electricity loads can grow without costs, reliability risks, or emissions impacts to other energy users.

While the recommendations are targeted at data centres, the implications extend well beyond the sector. Large commercial and industrial (C&I) energy users, manufacturers, retailers, property groups, and organisations with decarbonisation goals should pay close attention.   
The AEMC’s advice signals the directions of future energy market policy: greater accountability for renewable electricity procurement, firming, flexibility, and transparent participation in the electricity system.

 
What are the AEMC’s Recommendations for Data Centres?

The AEMC's proposed framework centres on four key obligations designed to support a reliable and affordable energy transition:

• Support new renewable electricity generation.
• Obtain firming arrangements to manage intermittency.
• Register with the Australian Energy Market Operator (AEMO) where appropriate.
• Deliver demand flexibility and prioritise efficient locations, including co-location with generation assets.

For energy users across Australia, these recommendations provide an early indication of how energy procurement and grid participation may evolve in the coming years.

How Will Data Centre Growth Affect Other Energy Users?

As demand from data centres increases, competition for renewable energy contracts, firming services, network capacity, and grid connections is likely to intensify. Organisations that proactively adapt their energy strategies may be better positioned to manage costs, reduce emissions, and secure long-term supply.

Below are eight actions energy users should consider today.

1. Revisit your electricity procurement strategy

 
Large C&I customers should expect Australia’s contracting environment will shift. Data centre obligations could increase demand for: 

• Renewable-backed electricity products
• Firmed renewable solutions
• Shaped supply contracts
• Battery-backed energy products
• Flexible load arrangements

Now is the time for large energy users to review:

• Exposure to spot market pricing
• Contract renewal timelines
• Renewable energy procurement strategies
• Hedging and risk management arrangements
• Long-term energy purchasing plans

A proactive procurement strategy can help organisations maintain access to competitive energy products as market demand increases.

2. Treat firming as a strategic cost, not an afterthought  

The AEMC’s firming obligation for data centres points to a broader market direction:  renewable energy claims will increasingly need to be backed by credible firming, not just annual renewable electricity matching. Energy users should assess options such as:

• Firmed renewable energy contracts
• Structured power purchase agreements (PPAs)
• Battery energy storage
• Demand response programs
• Flexible retail contracts
• Retailer-provided firming solutions

3. Move early on new and expanded grid connections  

The AEMO highlighted that data centres require careful management of system strength, voltage stability and transmission investment, and that coordinated planning and location matter for lower-cost outcomes. 

Any C&I business should get connection feasibility and network capacity advice early if they are considering the following: 

• Electrification projects
• Manufacturing expansion
• EV charging infrastructure
• Refrigeration upgrades
• Hydrogen production
• Battery storage projects
• New large electrical loads

Early engagement with network providers and connection specialists is becoming increasingly important. 

4. Turn demand flexibility into a commercial advantage  

A topic that we have often supported clients with quantifying, demand flexibility is valuable because it can reduce system costs, support reliability, and reduce emissions; the AEMC recognises this. Now is the time to identify flexible loads, batteries, thermal storage, backup generation limits, curtailment tolerance, and operational windows that could be monetised or used to reduce network and energy costs.  

 
5. Develop a renewable energy procurement roadmap

If data centres are required to procure Renewable Electricity Guarantees of Origin (REGOs) from new renewable generation, demand for credible new renewable energy products could increase. The AEMC has stated that the REGO policy is intended to improve the business case for new renewable generation. It naturally follows that organisations with 2030 targets, Australian Sustainability Reporting Standards (ASRS) obligations or Scope 2 reduction needs, and net-zero strategies should develop a procurement roadmap rather than waiting for existing contracts to expire. 

6. Reassess Scope 2 emissions and climate transition plans

AEMO’s projections indicate that data centres could account for a substantial share of Australia's grid-supplied electricity by both 2030 and 2050. Organisations should update energy and emissions scenarios, including: 

• Grid electricity pricing
• Renewable energy availability
• Residual grid emissions intensity
• Firming costs
• Carbon reporting requirements
• Emerging energy policy obligations

Scenario analysis can help organisations understand potential impacts on energy budgets, emission reduction pathways, and climate transition plans.

7. Monitor whether new obligations extend beyond data centres

The AEMC identifies as an open policy question whether future obligations should apply only to data centres or extend to large inverter-based loads. While no decision has been made, large C&I customers with significant future electricity demand should monitor policy development and avoid assuming these obligations will remain limited to data centres forever. 

8. Use this as a board-level risk and opportunity conversation

For boards and executive teams, the key message is that large new electrical loads are changing Australia’s energy transition, and businesses that wait may face higher procurement complexity, tighter renewable supply, more expensive firming and longer connection timelines.

Key Takeaway: Australia's Energy Market is Entering a New Phase

The AEMC's proposed data centre obligations provide valuable insight into the future direction of Australian energy policy.

Even if your organisation is not a data centre operator, these developments may shape future energy costs, procurement strategies, and decarbonisation pathways.

Preparing now can help organisations navigate an increasingly competitive and complex energy market.

How Schneider Electric can Help 

At Schneider Electric, our energy contracting and portfolio strategy specialists help organisations navigate changing energy markets, secure renewable energy supply, evaluate firming solutions, and develop long-term decarbonisation roadmaps.

Whether you're planning new electrical loads, reviewing procurement strategies, or developing a renewable energy roadmap, our experts can help you prepare for what's next.

Reach out to our energy contracting and portfolio asset strategy experts to unpack these actions: email us with the subject “Energy Contracting Inquiry.”