Every AI chatbot answer and streamed video runs through a data centre somewhere. Here’s why the AI boom has made them so hungry for electricity, and what that means for Australia’s power grid.
A data centre is a building packed with computer servers, storage and networking equipment. Data centres run almost everything online, from email and banking to streaming and cloud software.
They have existed for decades, but artificial intelligence has changed their scale. Training and running AI models needs vast numbers of powerful chips, mostly from Nvidia, working at the same time.
Why AI uses so much power
AI chips draw far more electricity than ordinary servers, and they’re packed closely together. A single large AI data centre can use as much electricity as a small city.
All that power turns into heat, so data centres need cooling systems to stop the chips overheating. Many use water for cooling, which can strain local supplies, especially in dry areas.
Training a large model uses a lot of energy, but using it does too. Every question asked of a chatbot needs computing power, and with hundreds of millions of people using AI daily, demand keeps growing.
That’s why technology giants including Microsoft, Amazon, Google and Meta are spending hundreds of billions of dollars a year on new data centres, and signing deals for power from solar, wind, gas and even nuclear plants.
What it means for Australia
Australia has become a popular location for data centres, with major investments from global tech companies and local operators such as NEXTDC and AirTrunk.
The Australian Energy Market Operator estimates data centres used about 5 terawatt hours of electricity in 2025-26, roughly 3% of demand on the main eastern grid. In its 2026 forecasts, it said that could rise almost sevenfold to around 34 terawatt hours, or about 13% of grid demand, by 2035-36.
That raises questions about whether enough new generation and transmission can be built in time, as ageing coal power stations close, and who should pay for it.
Governments are considering rules to make data centres pay for their own new energy and to make sure the cost doesn’t flow onto household power bills. Some states want large data centres to invest in extra renewable energy to match what they use.
Supporters say data centres bring investment, jobs and digital capability to Australia, and that their demand can help fund new clean energy projects. Critics worry about pressure on power prices, water use and emissions.
