Data centres drawing more than 30 megawatts would have to offset their full electricity demand with new renewable generation, cut their water use and cover the network costs they create, under national AI standards the federal government opened for consultation on Friday.
The paper, published by the Office of AI inside the Department of the Prime Minister and Cabinet, also proposes that frontier AI companies allowed to train large models in Australia disclose "defined reportable AI incidents" to Australian authorities. Submissions opened at 4am AWST on Friday and close at 2pm AWST on 9 October. The Commonwealth told National Cabinet in August it intends to legislate the standards in early 2027.
Most of what is in the paper is still a proposal, and it is written that way. The thresholds come from the Australian Energy Market Commission's draft access standards for large loads. Facilities under 30MW of ultimate network connection capacity would be excluded. Those between 30MW and 100MW would meet baseline requirements, and those above 100MW, or holding a portfolio adding up to 150MW, would face heavier ones.
The energy obligation is the costly one. Operators would retire renewable energy certificates equal to their annual consumption, ramping up over time until the certificates must come from new capacity only, with firming from gas, batteries or hydro. The Clean Energy Regulator would run it. The paper points to Ireland, which gives data centres six years to reach at least 80 per cent renewables. Data centres buying power from state-owned operators could apply to the Australian Energy Regulator to vary the obligation.
The paper sets out why the government wants this. It cites AEMO projections that data centre consumption in the National Electricity Market grows from about 5 terawatt hours in 2025-26 to 34 terawatt hours by 2035-36, lifting their share of grid electricity from about 3 per cent to about 13 per cent. On water, it cites an estimate that data centres used 5.5 gigalitres for cooling in 2025, about 0.04 per cent of industrial use, and a Sydney Water estimate that they could consume up to 20 per cent of Sydney's drinking water by 2035.
Other options floated include efficiency floors, such as a design power usage effectiveness below 1.25 for sites cooled with drinking water, a principle of "no net costs" to consumers and communities, and a question on whether data centres should sit a minimum distance from homes and schools.
For frontier AI training, the paper does not define what a reportable incident is. It asks whether disclosure should be proactive, on request, or published. It also floats what the labs might contribute in return for authorisation, listing "negotiated in-kind contributions, a compute reservation scheme, a public-interest research payment".
The paper is candid about the risk to investment. "If obligations are too onerous or uncertain, frontier AI firms and large data centre developers may substantially reduce their investments or direct investment elsewhere," it says. It cites an estimate of about $150 billion in data centre investment in Australia by 2030. It puts no figure on what compliance would cost an operator.
Nor has it settled how the rules reach projects already in the pipeline. The government "is considering at what point the standards should apply to projects that are not yet operational", and proposes that large sites submit compliance plans and confirm their building and energy connection approvals.
“We welcome investment, but on Australia's terms," Assistant Minister for Science, Technology and the Digital Economy Andrew Charlton said in a statement reported by the ABC. Anthropic, which announced a Queensland data centre deal this week, said it intends to build to the standards. "We believe that Australia should have agency in how AI is used and developed," its ANZ head of policy David Masters said.”
Belinda Dennett, chief executive of Data Centres Australia, said the paper "asks the right questions, on energy, water, costs and community".
Copyright sits outside this process and is being handled separately by the Attorney-General. The consultation closes on 9 October, and the government's legislation is due in early 2027.
