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Spotlight on Data Centres: the convergence of digitalisation and the energy transition in Australia

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National Infrastructure Seminar Series-Spotlight on Data Centres
20 Mar 2025 Insight
Article - By Aaron White

We hosted around 90 industry stakeholders in Sydney for our National Infrastructure Seminar Series to discuss the intersection of data centres and the energy transition.

Moderated by our partner and Head of TMT Asia, Aaron White, our panellists, Laura Caspari, Chief Renewables Officer & Managing Director, Engie, Michael Helmer, Chief Risk Officer & Group Executive for Legal, Governance & Sustainability, NextDC, and Matthew Grimes, Managing Director, Infrastructure, Brookfield Asset Management., discussed how data centres fit into the energy transition, the challenges facing data centre delivery in Australia and the key drivers and innovators of growth in the sector.

One thing is clear, policy reform and changes in law and regulation will be needed for data centre infrastructure at scale for the AI reasoning era. It was fantastic to bring together industry leaders to discuss the opportunities and challenges that come with the convergence of digitalisation and the energy transition."

Aaron White
Partner and Head of Technology, Media and Telecommunications, Asia

Key takeaways

  1. Data centres are processing powerhouses that enable efficient energy use – this is central to transitioning into an energy efficient economy
  2. BESS have multiple benefits, including reducing reliance on coal power, improving operational reliability and meeting renewables targets
  3. Increasing efficiency of existing resources critical for Australia’s power market, including minimising transmission loss, and improving data centre PUE
  4. Data centres facilitate a smarter use of energy - they are saving 280,000 households' worth of power each year
  5. Although speed of deployment and meeting capacity is top priority, data centre operators remain committed to net zero
  6. Data centres benefit local communities due to upgrades to water facilities and pipelines

  1. Rapid increase of demand on equipment for data centres (including transformers and leads) with limited availability of certain equipment in Australia
  2. Disconnect between federal, state and local governments means an integrated and bipartisan approach is needed to understand the role data centres have in the broader economy
  3. VPPAs have allowed data centres and their customers to secure renewable energy and achieve sustainability goals, however, anticipate renewable energy facilities being located physically near to or even on-site in the future
  4. Investment uncertainty arises from the frequency of Australia’s election cycles and no firm bipartisan commitment to support data centre deployment
  5. Some key challenges include capacity of the grid, planning obstacles and the social licence to operate
  6. Data centre locations depend on where power generation occurs and user location, as well as ease of maintenance and available grid capacity

  1. Direct to chip liquid cooling may see data centres' physical footprint shrinking despite maintaining or increasing power consumption levels
  2. There will always be demand for the efficiency of cloud computing power despite some AI technology moving to localised device processing
  3. Geographic location and political stability position Australia well for data centre expansion and to harness opportunities in Southeast Asia
  4. DeepSeek’s model disrupted the AI market, and while the impact on capacity is yet to emerge  – operator focus remains on securing long-term contracts with quality customers
  5. AI training centres will likely be centralised and located in the US in the near term, and Australia needs to be prepared for this development
  6. New mid-tier AI companies will likely emerge as disruptors to the existing technological giants

Key insights from panellists 

“The energy transition and the development of data centre infrastructure are linked and central to the development of Australia’s smart economy. Data centres are key ‘social infrastructure’ that enable business and aggregate our compute needs in the most energy efficient infrastructure, enabling us to continually innovate to minimise our carbon footprint. They are pivotal to enabling us to transition into an energy efficient economy. “– Michael Helmer, Chief Risk Officer & Group Executive for Legal, Governance & Sustainability, NEXTDC

“By sitting some data centres closer to renewable generation, we can use the grid more efficiently by reducing the transport costs of energy. Bringing the load to the generation means more generation can be built on the same transmission system. Effective siting of battery storage can also help us use our existing grid more efficiently by increasing the effective capacity of the system.” – Laura Caspari, Chief Renewables Officer & Managing Director, Engie

“Data centres consume about 1-2% of electricity in Australia today, this is forecast to increase to 3-4% within the next five years and 10% in the medium term. Historically the outlook for demand growth has evolved more gradually, accommodating this rapid shift will present challenges for grid infrastructure especially on the planning and regulatory front.” – Matthew Grimes, Managing Partner, Infrastructure, Brookfield Asset Management.

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Data Centres: Global perspective on key issues

Our comprehensive guide explores the surge in global demand, investment strategies and development opportunities and challenges amid the evolving regulatory landscape

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Key contacts

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Aaron White

Partner, Head of TMT Asia, Brisbane

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Peter Davis

Head of Energy, Australia, Sydney

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Amit Jois photo

Amit Jois

Partner, Sydney

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Niresha Mudalige photo

Niresha Mudalige

Partner, Melbourne

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The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.

© Herbert Smith Freehills 2025

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