Australia has a secret weapon in the race for AI compute

Tired of “Nimbys”? Australia has an alternative: “Bananas”, coined by a frustrated politician for “build absolutely nothing anywhere near anything”. Like other places, the land Down Under is grappling with growing objections to the ambitions of data centre developers. That’s a shame because AI might finally provide Australia with a way to export its ample green energy.

In terms of current AI compute capacity, Australia is a mid-ranker, with just 1.4GW installed, slightly behind the Dallas-Fort Worth area and well behind leaders such as northern Virginia with 4.5GW. But developers are queueing up to take advantage of the continent’s charms.

Anthropic this week signed its first deal to take space in a data centre in the country, anchoring a A$30bn ($21bn) project near Brisbane. In New South Wales, the most populous state, advanced discussions are under way for projects seeking 13GW — more than the state’s current daily demand. By 2050, data centres might account for 12 per cent of the country’s supply, up from 2 per cent at present, the country’s grid operator reckons.

That’s if they get built, of course. Selling the data centre dream to sceptical voters has been tough the world over: beyond the strategic asset argument, the economics aren’t sparkling since a lot of the value accrues to chip and software providers, and those owning the intellectual property — US companies in other words.

But for Australia, developing data centres — as well as the energy needed to power them, which Canberra requires in order to approve new sites — would be a helpful way to offset a faltering consumer economy. Data centre plans require $100bn of investment by 2030, according to Commonwealth Bank of Australia.

The country also has almost limitless space with which to generate renewable electricity: a 2024 study of G20 countries’ green energy capacity estimated Australia’s needs by 2050 would account for less than 1 per cent of either its solar or wind potential. Its renewables rank among the cheapest in the world: at $40 per MWh, its solar energy is on a par with Saudi Arabia, according to the International Renewable Energy Agency, and 35 per cent cheaper than in the US.

Australia has tried before to harness its natural resources in more climate-friendly ways. Much has been made of the potential for transporting renewable electricity via hydrogen to its liquefied natural gas customers, but the economics have so far not worked out.

But by feeding renewables into data centres and then selling computing power to the rest of the world, its bounty could be put to good use. This wouldn’t work in situations where speed is of the essence, such as autonomous vehicles. But it may be well suited to training new models, a task that is commanding hundreds of billions of dollars of investment.

A huge expensive effort to switch from coal to renewable power sources is already under way across Australia. Taking advantage of the AI boom in order to spread that financial burden is anything but bananas.

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