Origin Energy is exploring co-locating data centres at its Eraring power station site, leveraging existing infrastructure ahead of the coal plant’s 2029 closure. The move highlights a critical tension in the market: surging demand from energy-intensive industries is colliding with the harsh economics of building new renewables. Origin CEO Frank Calabria noted that wind construction costs have jumped 50 per cent since 2020, complicating the financial close for major projects like the 1.5 GW Yanco Delta wind farm. This investment pressure is compounded by soft market signals, with NEM spot prices falling another 32.7 per cent week-on-week to average $44.32/MWh.
The scale of incoming demand was underscored by news that an unnamed AI firm will build Australia’s largest data centre in South Australia. The company was drawn by the state's status as the first jurisdiction to achieve 100 per cent net renewable energy. This single facility is expected to fundamentally alter local consumption patterns. It could also help mitigate instances of negative demand by providing a significant, consistent load sink for the state's abundant solar and wind generation.
Policy thinkers are now proposing structural interventions to bridge the gap between industrial demand and affordable clean energy supply. A new report from the McKell Institute proposes establishing 'Sovereign Power,' a federal entity to build and own renewable assets. The model aims to supply heavy industry with electricity at cost, leveraging lower government borrowing rates. The institute calculates this could reduce power purchase agreement prices by $26/MWh, preventing the need for further industrial subsidies.
Meanwhile, the project pipeline continues to face significant cost pressures, exemplified by Snowy Hydro. The government-owned utility has commissioned a report emphasising the strategic importance of Snowy 2.0, signalling that another major cost blowout for the pumped hydro scheme is imminent. A formal budget and timeline update is expected shortly. Despite these headwinds for large-scale projects, the storage sector shows continued momentum. State authorities granted development approval for a new gigawatt-scale, four-hour battery in coal country. In a separate deal, Taiwanese developer Recharge Power partnered with Australia’s Energy Decarb to deliver a 292 MWh battery storage pipeline.
Australia's storage buildout mirrors a global trend, with developers in Europe securing finance for 2.2 GWh of new battery capacity scheduled for 2027. This international activity reinforces the critical role storage plays in managing grids with high renewable penetration. Back home, the market will be watching for AEMO's discussion paper on shortening the NEM settlement cycle, with submissions due by 18 June. The AER is also consulting on new network resilience guidelines, with feedback closing on 10 July.