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In a blunt assessment, the operator warned that if these projects proceeded, peak demand would \u201cmore than double\u201d \u2013 an explosion it stated was \u201cnot possible\u201d to support. <\/p>\n\n\n\n
To manage even a fraction of this load, the report outlines the need for significant new infrastructure, including potential new terminal stations at Truganina, Donnybrook and Somerton. However, the AEMO noted there was \u201cno certainty\u201d regarding which projects would go ahead.<\/p>\n\n\n\n
Energy experts are now urging the Allan government to intervene and charge developers for the extra burden placed on networks. They also warn that demand is, in part, being fuelled by developers inflating power needs to secure permits they intend to sell.<\/p>\n\n\n\n
Victorian network operator AusNet revealed it is assessing a pipeline of more than 10 gigawatts of data centre connection requests \u2013 a figure that the Victoria\u2019s auditor-general has said could exceed demand above the state\u2019s current supply capacity.<\/p>\n\n\n\n
However, the energy giant warned the market operator that this unprecedented level of interest was being driven partly by applicants lacking \u201cdemonstrable experience\u201d in the sector.<\/p>\n\n\n\n
Leading energy market expert Professor Bruce Mountain has warned that Victoria\u2019s data centre boom has the hallmarks of a gold rush, fuelled by speculative developers overstating their power needs, seeking to secure grid approvals to create options they hope to on-sell.<\/p>\n\n\n\n
He said the \u201cenormous\u201d and \u201cbreathtaking\u201d connection figures received by AusNet and AEMO defied reality.<\/p>\n\n\n\n
\u201cHopeful developers have an incentive to overstate their prospects to create options to later sell,\u201d Mountain said. \u201cThere will be a huge gap between the total electrical demand of those proposals and what actually gets developed.\u201d<\/p>\n\n\n\n
Mountain, the director of the Victoria Energy Policy Centre, warned of a misalignment of incentives: developers want valuable permits, the government wants to facilitate those applications in the name of economic growth, and network monopolies are eager to expand their regulatory asset base to boost profits.<\/p>\n\n\n\n
Fuelled by the explosive growth in cloud computing and AI tools such as ChatGPT, data centres are massive industrial warehouses filled with the servers and storage needed to process vast amounts of digital information.<\/p>\n\n\n\n
These sites not only have a massive thirst for electricity, but also use huge amounts of water to cool servers down.<\/p>\n\n\n\n
Data centres have also emerged as a shining light in Victoria\u2019s economy, driving a surge in commercial building investment that has kept construction pipelines going amid a broader market slowdown, according to the budget update released this month.<\/p>\n\n\n
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But if billions of dollars\u2019 worth of grid upgrades are completed for demand that never materialises, Mountain says it will be Victorian households and businesses that could be left paying the bill \u2013 a repeat of the \u201cgold-plating\u201d of the past, when electricity distribution networks overinvested in poles and wires in the name of demand growth that never materialised.<\/p>\n\n\n\n
\u201cIf policymakers and network companies fail to be disciplined in sheeting back augmentation expenditure to these data centre companies, then we\u2019ll end up with exactly the same problem of wasted overcapacity we have had,\u201d he warned.<\/p>\n\n\n\n
Mountain says that to protect consumers a system of financial bonds and minimum payment obligations should be introduced. This would ensure that if a data centre failed to consume the power it promised (and so generate the promised revenues), the developer \u2013 not the public \u2013 would remain responsible for the network costs.<\/p>\n\n\n\n
It is the only way, he argues, to \u201csort the wheat from the chaff\u201d and ensure realism.<\/p>\n\n\n\n
\u201cI get a little bit weary when I hear of government\u2019s promising expansion,\u201d Mountain said. \u201cThis Victorian government has shown great willingness to pass costs on to others in pursuit of its own policies.<\/p>\n\n\n\n
\u201cThe government must protect consumers.\u201d<\/p>\n\n\n\n