Australia advances data centre energy policy on three fronts as battery storage emerges as key compliance tool

The AEMC, the rule-maker for the NEM, set out four recommendations, which were delivered to the Energy and Climate Change Ministerial Council on 28 July and published on 5 August.

The first requires data centres to offset their electricity consumption using certificates linked to new renewable energy generation through the existing Renewable Electricity Guarantee of Origin (REGO) scheme, closing the loophole that would otherwise allow a data centre to purchase certificates from existing solar or wind assets without triggering new build.

The second requires data centres to contract for firming capacity alongside those certificates, addressing the risk that renewable energy certificates alone do not guarantee dispatchable supply.

The third requires data centres above a certain threshold to register as NEM market participants, giving AEMO real-time visibility of large inverter-based loads and the regulatory hook to enforce the firming obligation.

Meanwhile, the fourth supports demand flexibility and co-location of generation and storage through connection agreements.

Tightening rules for data centres

As PV Tech reported, the AEMC and NSW moved simultaneously on 5 August to tighten data centre energy and grid access rules.

The NSW ‘Electricity Infrastructure Investment Amendment Bill 2026’ introduces REZ-style powers that give the state energy minister the authority to declare large load infrastructure access schemes covering all or part of New South Wales, authorising or prohibiting access to specified network infrastructure by facilities capable of transmitting 5MW or more.

A REZ is a designated geographic area where the government controls which projects can connect to the network, sets access fees and allocates the costs of network upgrades between connecting participants rather than passing them to consumers.

NSW has used this model to manage large-scale renewable energy development across zones, including Central-West Orana and New England. The 5 August bill applies the same framework to data centre connections.

The cost-allocation framework within the bill is its most consequential provision. When determining access fees, the consumer trustee must ensure that data centres are responsible for the cost of network infrastructure their load requires, and that NSW electricity customers do not pay those costs.

The consumer trustee is expressly prohibited from maximising the financial value for NSW electricity customers when setting fees for large-load infrastructure access schemes.

The bill also broadens the definition of network operator to include any person involved in planning, financing, developing, or constructing network infrastructure, enabling more flexible delivery models that infrastructure data centres will require.

At the national level, PV Tech also reported that Queensland and the Northern Territory broke ranks at the 28 July Energy and Climate Change Ministerial Council (ECMC) meeting, opposing the nationally consistent framework backed by the other six state and territory governments.

Their objections centred on concerns about the pace and design of the obligations, with Queensland in particular signalling it did not support mandating renewables requirements at the federal level at this stage of the market’s development.

Bowen subsequently warned that states could add more rigorous requirements but could not water down the national floor, speaking at the National Press Club on 5 August.

He confirmed the federal government would use its powers over AEMO and the AEMC to mandate that new data centres connect to the grid only on terms consistent with the national framework, regardless of whether dissenting jurisdictions sign on.

States and territories that wish to impose tighter requirements, including higher renewable energy thresholds or more stringent additionality rules, remain free to do so.

The framing is designed to prevent a race to the bottom among jurisdictions competing for data centre investment by offering more permissive energy standards. Federal legislation to give the framework full legal force is expected to be introduced to Parliament in early 2027, following National Cabinet consideration in August 2026.

Battery storage as the compliance solution

The firming obligation at the heart of the AEMC framework has direct implications for the battery storage sector and for data centres that hold renewable energy certificates but cannot demonstrate dispatchable supply risks, non-compliance, and early curtailment during load shedding events.

Co-located battery storage resolves that problem, converting intermittent renewable energy generation into a firm, schedulable supply commitment.

Fluence, a battery storage system integrator, has argued that co-located battery storage can address three distinct commercial problems for data centres simultaneously: load smoothing, cold-start backup and speed to power.

On the last of those, Fluence’s analysis of the US market found that co-locating battery storage and using it to reduce the firm power commitment required from the grid operator can compress a three-year interconnection wait to 15 months, generating material additional revenue for data centre operators during that period.

The fourth AEMC recommendation, supporting co-location of generation and storage through connection agreements, creates a formal pathway for exactly that configuration in the Australian context.

The scale of the storage opportunity attached to the data centre policy framework is substantial.

AEMO has flagged that 17 data centre load connection projects with a combined maximum capacity of 9GW are already working through the transmission network connection process, with 52% of that capacity in NSW, 31% in Victoria and 17% in South Australia.

If even a fraction of those projects co-locate battery storage to meet the firming obligation, the volume of BESS procurement attributable to data centre compliance could rival the current utility-scale deployment pipeline.

AirTrunk, a Singapore-headquartered data centre operator with 11 facilities across the Asia Pacific region, recently argued that data centres should be treated as anchor tenants for new clean energy infrastructure, providing the long-term demand certainty needed to bring generation and storage investment forward rather than waiting for supply to arrive.

Under the AEMC’s framework, that position shifts from a voluntary commitment to a regulatory requirement, giving project developers contracting with data centres a firmer foundation for long-term power purchase agreements and project finance.

Implementation timelines vary across the three regulatory streams. The AEMC estimates 12 months to implement the renewable energy certificate obligation and 24 to 36 months for the market registration and connections reforms after ministerial endorsement.

National Electricity Rule change requests are due for ECMC consideration in September 2026. The NSW bill was introduced on 5 August, with further details on access scheme design expected to follow.

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