Legally binding large-scale data centers to supply their own new clean energyproaches to artificial intelligence, which is expected to be legislated in early 2027
In an address at the University of Sydney (USyd), the Australian Prime Minister Anthony Albanese said large data centre developments will have a legal obligation to underwrite their own new power supply, pay their full share of connection costs and reduce power when needed to strengthen the grid.
“We will create a legal obligation for the next generation of large-scale data centers to underwrite new power supply,” Albanese said on 15 July 2026.
“To pay their full share of grid connection, so no costs are passed on to homes or businesses. And to put at least as much energy into our grid as they take out of it. To be net-generators, not net-users. To build new renewable generation – and firming – to strengthen our national energy resilience. And ensure data centres do not increase power prices for Australians.”
“Australia is the sunniest continent on earth but we’re also the driest. Which is why our rules will require data centres to minimize their water use, maximize their energy efficiency, and pay for any additional water infrastructure required,” Albanese said.
“These location, energy and water obligations take in every level of government and their overlapping powers. Which is precisely why we need national standards. So, every level of government is on the same page and driving to the same outcome.”
“Every country on earth is grappling with these challenges right now. Australia will be the first country in the world to bring these issues into a single, national framework.”
Australian National University Crawford School Centre for Climate and Energy Policy Dominic Meagher said the Prime Minister’s instincts on AI are on point.
“His focus on the energy and water needs for data centres is essential. And most importantly, he’s now fired the starting gun on a process to consult across government,” Meagher said.
Queensland University of Technology Digital Communication Professor Daniel Angus also responded saying that AI is too often talked about as if it exists purely in the air, “when in reality it’s built on highly re
“There was some signalling around neutral impacts on energy grids, however we still need clear expectations around renewable energy commitments, environmental accountability and ensuring these developments deliver a genuine public benefit rather than simply private returns,” Angus said.
“While we heard much about Australia’s abundance of sunlight, there was little detail of specific renewable or net-positive environmental targets, this detail will be crucial.”
The Australian Academy of Technological Sciences and Engineering (ATSE) Chief Executive Officer Peter Derbyshire said ATSE welcomed the government’s intention on nationally consistent requirements for data centres.
“As demand for data centers grows,investmentmust also support renewable energy, water-efficient technologies and technologies that can make this digital infrastructure more sustainable and that deliver long-term benefits for local communities,” Derbyshire said.
The Climate Council of Australia (CCA) has welcomed the Office of AI but said it must enforce the legal obligation for new data centers to fund and build additional renewable energy.
CCA Chief Executive Officer Amanda McKenzie said the AI-driven surge in data centers will have a profound effect on Australia’s energy systems, “and unchecked, this growth could mean soaring prices and rampant climate pollution. The Government must adequately regulate data center growth to ensure it occurs in the best interests of Australians.”
McKenzie referred to the coinciding release of the Clean Energy Regulator’s (CER’s) GenCost report showing solar and wind are the lowest-cost energy mix for Australia, “but right now data centers could delay this shift.”
“This means upholding Prime Minister Albanese’s pledge that data centres match their energy demand with new renewables and storage to shield households and other businesses from increased costs.”
“Accelerating the roll-out of proven renewable energy is the only way to keep prices as low as possible, ensure grid stability, and slash climate pollution to better protect our communities, economy and environment from worsening climate disasters,” McKenzie said.
University of Queensland Research Fellow Dr Shuai said the Prime Minister’s focus on proposed energy and water requirements for new data centers is important, but Australia should also encourage research into, and adoption of, genuinely efficient AI: meaning systems that are faster, less re
“The main reason for that is AI systems are scaling rapidly and becoming increasingly computationally demanding. If there’s no standards and incentives for efficiency, the competitive benefits and low marginal cost of using AI could drive very high aggregate re
“Infrastructure policy should actually look beyond the efficiency of data centers themselves and consider the models and software running inside them.”
Researchers at the USyd Sydney Nano Hub are working on this issue, announcing in March 2026 they had built an ultra-compact AI chip that is able to make calculations using the power of light, at the speed of light.
The nano photonic chip prototype, which harnesses the power of light particles (photons) is built completely in-house and the researchers say the prototype could play an important role in developing more energy-efficient AI hardware potentially lowering the overall energy footprint of future computing systems.
The nano photonic chip prototype uses light that can travel through materials without electrical resistance, so it does not generate heat in the same way as electricity does.
A USyd statement said the nanostructure on the chip takes up tens of micrometres, roughly comparable to the width of a human hair, and together help form a neural network: artificial neurons that mimic the human brain to recognise and complete calculations.
The prototype performs calculations on the picosecond timescale, or trillionths of a second – the time it takes light to pass through the nanostructure.
“We’ve re-imagined how the photonics can be used to design new energy efficient and ultrafast computer processing chips,” said Professor Xiaoke Yi, from the School of Electrical and Computer Engineering and director of the Photonics Research Group.
“Artificial intelligence is increasingly constrained by the energy consumption. This research performs neural computation using light, enabling faster, more energy-efficient and ultra-compact AI accelerators.”
Their findings are published in Nature Communications.
