Episode #23
Can the world copy Australia's data centre & renewables policy, with Hamish McKenzie from the Grattan Institute
Recorded on 13 August in California / 14 August in Australia. Excited to have Hamish McKenzie as our co-host this week. He is Deputy Director of Climate Change and Energy at the Grattan Institute , and previously worked in the private sector and parliament. This week we focus on 3 stories shaping Australia’s energy transition, and what they tell us about similar challenges playing out in the US and UK: 1. Australia’s proposed “bring your own power” rules for data centres: Australia already has 160 data centres , with over 90 in the pipeline , as investment and electricity demand grow rapidly. We discuss the government’s proposed framework requiring new data centres to procure 100% renewable electricity from additional generation , secure firming capacity, provide grid flexibility and respond to locational incentives. We look at how renewable matching could work, including proposals to divide procurement into different periods of the day rather than relying on annual matching. We explore the tension between data centres that can be developed in ~2 years and renewable projects that can take over 7, and what this could mean for wind, offshore wind, batteries and gas firming. 2. Australia’s 82% renewable-electricity target and electricity-market reform: Australia’s National Electricity Market is approaching 50% renewable generation , but project development is slowing as the country works towards its 82% renewables target by 2030 . We discuss delays to wind and transmission, community opposition, differing state policies and concerns that projects awarded support through the Capacity Investment Scheme may not all reach construction. We explain the tenor gap, developers need long-term revenue certainty to finance projects, while buyers are often reluctant to sign contracts beyond a few years. We examine the proposed contract-recycling mechanism intended to bridge that gap, and the challenges of implementing market reform across Australia’s federal and state governments. We discuss the changing generation mix: solar and batteries are growing rapidly, wind is struggling, batteries are increasingly displacing gas from intraday firming, and wholesale prices have fallen sharply over the past year. 3. Australia’s domestic gas policy during the Iran War: Australia is one of the world’s largest LNG exporters , while remaining heavily dependent on imported liquid fuels and exposed to international energy-market volatility. We discuss how east-coast LNG exports connected domestic gas consumers to global markets and contributed to higher and more volatile prices, particularly during the 2022 energy crisis. The government’s proposed domestic gas-reservation policy would require LNG exporters to make gas equivalent to 20% of exports available to the domestic market. We consider whether lower domestic gas prices could slow electrification, while improving energy security and limiting exposure to extreme global price spikes. We also look at batteries increasingly replacing gas for short-duration firming, while gas retains a role during longer periods of low renewable generation. We finish with Australia’s wider transition: renewables have risen from around 8% of electricity in 2010 to close to 50% today , rooftop solar and household batteries have scaled rapidly, and policymakers are now looking to commercial and industrial solar as another source of quickly deployable capacity.
