Demand for electricity from datacentres is expected to surge, potentially straining Australian energy supplies and driving up prices. 

This increase is driven by the growth of energy-intensive artificial intelligence services, which could require an additional 3.3 to 5 gigawatts of capacity by 2030, equivalent to 15 per cent of the total load, according to Tom Allen, an analyst with UBS.

“Tech firms to manage their energy consumption more flexibly, akin to how aluminium smelters power up and down to support the grid.

Currently, datacentres account for nearly a quarter of large industrial power demand in Australia, with UBS forecasting a 16 per cent annual increase in load through 2030. 

This rising demand is projected to cause wholesale power price spreads during peak periods to rise by as much as 70 per cent by 2030. 

The price spreads between 3:30 pm and 8:30 pm have averaged $312 per megawatt-hour this year and are expected to reach $525/MWh by the decade's end, according to UBS estimates.

The Australian Energy Market Operator (AEMO) has largely overlooked the rise in datacentre demand in its forecasts, including in its recent biennial integrated system plan (ISP). 

However, Allen predicts that the next ISP will reflect stronger load growth from this emerging and significant customer cohort.

Australia's energy sector is navigating multiple challenges, including the transition from coal-fired power plants to renewable energy sources like solar and wind. 

The nation also faces potential gas shortfalls in southern states such as Victoria, despite being a major gas exporter. 

Recent calm weather conditions have reduced wind power output, necessitating increased coal burning and highlighting the need for more energy storage solutions.

Electricity demand is also climbing due to the proliferation of electric vehicles and the expansion of datacentres. The International Energy Agency reported that datacentres consumed 460 terawatt-hours of power in 2022, with consumption expected to more than double to 1000 TWh by 2026.

A presentation from last year estimated that Sydney alone had about 724 megawatts of datacentre load, with an additional 200MW under construction and a further 1 gigawatt in planning stages. 

However, datacentres could also benefit the grid by managing minimum demand, which runs continuously. 

The experts say they could participate in demand response programs, shutting down during peak load periods in exchange for payments.