The Albanese government will fast-track approvals for energy-intensive data centres in a bid to capture investment from the global artificial intelligence boom, opting to streamline regulation rather than offer taxpayer subsidies as the OECD warns surging electricity demand could jeopardise Australia's path to net zero.
Industry Minister Tim Ayres and Assistant Science Minister Andrew Charlton are finalising national data centre principles with the states that would allow projects meeting sustainability, renewable energy and efficiency benchmarks to access co-ordinated approval pathways.
The move follows an internal debate within the federal bureaucracy, with the government ultimately ruling out direct financial incentives in favour of cutting red tape to attract investors.
The policy push comes as the OECD, in its annual survey of Australia, cautioned that rapid growth in data centres would require significantly greater efforts to decarbonise the electricity system, warning that power demand is set to rise sharply alongside electrification of industry and transport and the emergence of new green industries.
The OECD said annual investment in power grids would need to double from 2023 levels, while renewable energy spending would need to lift by 23% to stay on track for the 2050 net zero target.
Data centres are forecast to account for about 6% of electricity demand on the east coast grid by 2030, rising to 11% by 2040, according to the Climate Change and Energy Department.
The surge in planned data centre development has already forced the government to downgrade its electricity emissions reduction forecasts.