The Australian federal government will move to legislate national energy rules for AI data centres, overriding opposition from Queensland and the Northern Territory, after settling the framework at a national cabinet meeting on Wednesday, August 271,2.
Queensland Premier David Crisafulli has confirmed his state will not support proposed rules requiring data centres to source power from new renewable energy projects, backed by gas. The Northern Territory has aligned with Queensland, with both states refusing to sign on to a standard that ties data centres to renewable projects at the exclusion of coal and gas. Energy Minister Chris Bowen said on Sunday that the federal government would find agreement with willing states and legislate to override those who opposed the plan.
Under the proposed policy, all next-generation data centres — including those that train and power AI agents — would be required to use renewable electricity and add more power to the grid than they consume. The rules would also require developers not to push up energy prices, to meet their own infrastructure costs, to minimise water use, and to locate facilities away from homes, schools, and potential housing or agricultural sites3,4. Projects approved before the new rules take effect would remain subject to existing state and territory laws.
Prime Minister Anthony Albanese will use the national cabinet meeting to assuage premiers, promising that new federal approval laws will complement rather than replace state rules. He also plans a major piece of legislation next year that would go beyond energy, setting copyright rules for AI businesses and imposing standards for security, safety, and skills development. Albanese will tell a Business Council event on Tuesday that frontier AI development would advance national sovereignty and is essential for national security, business productivity, science, innovation, and resilience.
The urgency is underscored by demand forecasts from the Australian Energy Market Operator. AEMO projects data centre power use will increase seven-fold over the next decade, with electricity demand expected to grow from 5 to 34 terawatt hours by 2035–36 — rising from 3% of overall consumption to 13%. In a high-growth scenario, AEMO said consumption could reach 52 TWh, a 10-fold increase. AEMO's annual Electricity Statement of Opportunities identified the industry's rapid growth as one of the most significant drivers of electricity demand growth. AEMO chief executive Daniel Westerman said record levels of new generation and storage coming online had improved the reliability outlook.
Australia currently has 165 operating data centres, with a further 225 in development. The government estimates investment plans announced over the past three years could scale up to be worth more than $100 billion to the Australian economy. However, more than a third of data centre projects listed in 2025 have since been cancelled, and operating facilities are taking years to ramp to full capacity.
The federal government has framed the rules partly as a shield against a US-style populist backlash, requiring data centres to bring their own energy supply. Dozens of US data centre projects worth more than US$100 billion have been blocked or delayed by local opposition this year, according to US group Data Center Watch. Queensland's own counterproposal would require data centres to provide a social impact assessment and a community benefit agreement with the relevant local council before lodging a development application.
The federal Coalition has questioned how the Albanese government intends to grant itself override powers, with Shadow Energy Minister Dan Tehan calling the move potentially unconstitutional and suggesting the government may attempt to use Corporations Act powers. Climate Council chief executive Amanda McKenzie warned that data centres were set to consume an enormous share of Australia's electricity, saying "we've got one shot to get the rules right".
ANALYSIS The federal government's willingness to legislate over state objections signals that AI infrastructure regulation is being treated as a national-level policy priority rather than a state planning matter, with energy, copyright, and safety rules bundled into a single legislative package.