Australia wants more data centres. A disagreement over power sources stands in the way

Two jurisdictions have forced the prime minister to back down on a major policy that would have required all new AI data centres to be powered by renewable energy rather than coal and gas.

Anthony Albanese left the door open at a meeting of the nation's leaders on Wednesday to a more "flexible" approach as Queensland and the Northern Territory refused to agree to standards requiring them to use renewables for new data centre developments.

He announced the agreement on the AI laws alongside domestic violence measures and firearm reforms following a meeting of National Cabinet in Sydney.

"We want to make sure that in attracting investment, we don't have eight different systems operating around the country," he said on Wednesday.

"That's why we came to a common position, which recognises that all states aren't exactly the same, and that was accommodated in the way that we normally do in a flexible way."

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South Australian Premier Peter Malinauskas said the nation's leaders agreed renewables would be the main form of energy to power future data centres in Australia.

"Acknowledging that there are different circumstances through the fact that in Queensland, for instance, they have state-owned generation," he told ABC's 7.30 on Wednesday.

"So there's no need for the federal government to use its powers that it has to override what states want."

Gregor Verbic, an energy expert at Sydney University, said the national grid was facing the imminent closure of multiple coal-fired power stations.

"(It) will leave a huge gap in the generation capacity, and we are not building new capacity fast enough," he told the Australian Associated Press news agency.

The federal government has proposed legislation to force data centre developers to provide their own renewable energy source.

Both the Queensland and NT governments provided considerable pushback, with the final national agreement failing to mention renewable energy directly.

Verbic said ensuring the energy brought online is renewable is essential to meet Australia's emissions reduction targets.