Battery energy storage systems (BESS) can simultaneously solve three distinct problems for data centres. Still, Australia risks creating a regulatory patchwork that slows deployment unless policymakers move toward clearly defined, nationally consistent frameworks.
This is according to Sam Markham, Fluence’s senior manager for policy & strategy in Australia, and Jeff Monday, the company’s senior vice president and chief growth officer, who spoke to ESN Premium on the sidelines of the Australian Clean Energy Summit 2026 in Sydney last week.
The conversation covered grid interconnection constraints, the commercial case for co-located storage, the ratepayer implications of data centre load growth and what Fluence sees as the most important policy steps Australia needs to take before the opportunity closes.
The backdrop to the interview is a market moving fast in multiple directions. Australia has moved to legislate a net-generator requirement for large-scale data centres, requiring facilities to underwrite new renewable energy supply and pay their full share of connection costs.
Try Premium for just $1
- Full premium access for the first month at only $1
- Converts to an annual rate after 30 days unless cancelled
- Cancel anytime during the trial period
Premium Benefits
- Expert industry analysis and interviews
- Digital access to PV Tech Power journal
- Exclusive event discounts
Or get the full Premium subscription right away
Or continue reading this article for free
The Energy and Climate Change Ministerial Council (ECMC) subsequently backed a nationally consistent framework at its 28 July meeting, with Queensland and the Northern Territory the only jurisdictions to oppose the approach. AEMO has separately lodged a rule change request addressing grid-supportive behaviour within the operational timeframe, covering fault ride-through, ramping and related requirements.
All of that policy activity is running in parallel, and both Markham and Monday are alert to the risk of those streams pulling in different directions.
“We’ve got the National Electricity Market (NEM) implementation now. We’ve got new directives coming from ECMC, and it’s at risk of creating a really complicated patchwork for what is ultimately a government commitment to decarbonise by a certain date,” Markham says.
“We need a clearly defined, simple policy, and then if hyperscalers genuinely need 24/7 clean power, that will come through.”
Monday frames the stakes plainly. “If we don’t solve it, data centres are going to look elsewhere. It is a rich opportunity for industry and policymakers to come together and figure out what the solution looks like.”
Three use cases, one asset
The starting point for Fluence’s position is a taxonomy of what battery energy storage systems are actually being asked to do in a data centre context. Monday breaks the storage opportunity into three distinct use cases, each commercially independent but potentially more powerful when addressed together.
The first is load smoothing. Modern data centres, particularly those running AI workloads, draw power in highly variable ways that are difficult for grid operators to manage in real time.
“You can put a Fluence SmartStack at the centre of your power architecture delivery system, and it can act as basically a shock absorber between the data centre and whatever the generation asset is,” Monday says.
“It can really power smooth both ways and stabilise that variable data centre load in a really unique and interesting way.”
The second is cold-start backup, replacing diesel generators to help hyperscalers meet the carbon-neutral commitments they made before the current surge in AI-driven demand created tension between their decarbonisation goals and their power requirements.
“All the hyperscalers came out with carbon-neutral goals before this AI surge. So now they’re in this interesting place where they’re still needing to meet their carbon neutral goals while also bringing on a lot more power consumption,” Monday says.
The third, and the one Monday describes as potentially the largest commercial application for Fluence’s SmartStack product globally, is speed-to-power.
In the US, where interconnection queues can stretch to three years or more, the cost of sitting with a fully fitted data centre that cannot connect to the grid is material.
Monday puts a number on it: a 100MW data centre filled with GPUs but waiting for a grid connection loses approximately US$100 million in revenue per month. By co-locating battery storage systems and using them as peak-shaving assets to reduce the firm power commitment required of the grid operator, Fluence has found it can compress a three-year interconnection wait to fifteen months.
“For one of those data centres, it’s US$1.5 billion we’re going to help generate in extra revenue,” Monday says.
“We haven’t really found the upper limit or the law of diminishing returns of that being applied to accelerate the speed to power use case. I’m not sure we will.”
Markham translates the argument into the Australian context, where the constraint takes a different form but has a similar effect.
“We don’t have interconnection queues in the same way, but for Sydney, we’re just out of transmission infrastructure right now, and the Sydney Ring isn’t built until 2032 or 2033, and that’s just too long.”
The firm power commitment model still applies. “You can get more out of your existing transmission infrastructure by using a data centre to do that peak shaving,” she says.
Fluence’s SmartStack has already been integrated into Siemens and NVIDIA’s AI data centre reference architecture, positioning the product at the infrastructure planning layer rather than as a retrofit, and signalling that the technology is already being treated as a core component by some of the largest players in the data centre supply chain.
What connects all three use cases is the way Monday describes what happens when battery storage is placed between the data centre and the grid.
“Batteries are unique. They can act as both a transmission and a generation asset,” he says. “That agility allows us to address the key needs of the data centre while also protecting consumers through the grid resiliency that we’re driving.”
Fluence describes this internally as the ‘ratepayer shield’: the idea that a battery storage system, co-located with a large load, acts as a buffer that insulates the broader grid, and by extension, everyday consumers, from the stress that a large, variable new load would otherwise impose.
Markham extends the argument into ancillary services markets. If data centres provide grid-supportive behaviour under clearly defined operational requirements, she says, AEMO would have a clearer real-time view of how demand is changing, which could reduce the volume of regulation frequency control ancillary services the market operator needs to hold in reserve.
“That’s just one market and one example, but it has so many downstream consequences,” she says.
Data centre developer AirTrunk made a related argument at the same summit the day before, framing data centres as potential anchor tenants for new renewable energy infrastructure.
The AEMC has separately proposed new technical standards requiring large data centres to remain connected during grid faults rather than tripping offline, following international incidents in which simultaneous disconnections caused cascading blackouts. The draft standards apply to facilities with loads of 30MW or more.
Firmed renewables, not just renewables
On the net-generator requirement, Markham is broadly supportive of the policy direction but precise about the risk of getting the details wrong.
“I’m really concerned about making sure that any requirements are focusing on firmed renewables, not just renewables in isolation,” she says.
“To accelerate our renewables transition, you need to have a scheme that brings on firmed renewables, not just renewables.”
The distinction matters commercially. A data centre that procures renewable energy certificates from existing solar PV power plants, for example, may technically meet a renewability requirement while adding no new generation capacity to the grid and doing nothing to firm the renewable energy it consumes.
Monday picks up the same thread from a different angle, pointing to curtailment already present in the Australian grid.
“There are a lot of unused electrons sitting in the Australian grid in the form of curtailed energy. Battery storage is a great way to absorb those electrons and reapply them into the data centre,” he says.
“That’s where policymakers and industry need to come together to put those curtailed electrons to work.”
On battery storage system duration, Monday’s view is that the requirement will increase over time, but that the right way to think about the investment is over a ten-year arc.
“The duration of the battery is going to push from two to four hours as we progress, to a use case stacking that would require a longer duration,” he says.
The power smoothing use case is likely to diminish as chip architecture and software improve, freeing up battery capacity that can then be traded back into the grid.
“If you think about your Internal Rate of Return (IRR) model over a ten-year arc and apply excess capacity being traded back in, it has dramatic impacts on your return model and could change the way that you should be thinking about the build of batteries today to set yourself up for success for tomorrow.”
Markham’s closing position is a call for coherence rather than a specific policy outcome.
“We’ve got a fracturing already happening, looking at connections as discrete from operations, discrete from the bring your own renewables requirement, and they are all interrelated,” she says.
“I want a nationally consistent, whole-of-grid approach, because that is what is going to allow us to move quickly and give data centres and hyperscalers the confidence to commit capital in Australia rather than somewhere else.”
Monday’s answer pointed in the same direction.
“The main opportunity for data centres is to continue to look at batteries as an agile asset that can solve three discrete use cases through a single application. Right now, it is still only being contemplated on a use-case-by-use-case basis. By putting battery energy storage at the centre of it, it gives you a flexible capacity that allows you to address the key concerns that data centre customers need to solve most.”
Never miss an Australian energy storage story. Sign up for our Australia newsletter and get the latest project announcements, policy updates and market analysis delivered directly to you.
Solar Media (part of Informa Group) will host the Battery Asset Management Summit Australia 2026 on 25-26 August at the Amora Hotel Jamison in Sydney, bringing together asset owners, operators, trading teams and optimisers to address revenue strategy, lifecycle management and operational performance across Australia’s fast-growing battery storage fleet.
Readers of Energy-Storage.news can get 20% off their tickets using the code ESN20 at checkout. Find out more about the Summit on the official website.
