July 29, 2026, (Inside AI) — Queensland and the Northern Territory have rejected a federal Labor push to mandate that power-hungry AI datacentres use renewable energy, deepening a state-federal rift over how to handle the surging electricity demands of the artificial intelligence boom.
The opposition came as S&P Global warned that datacentre power consumption could rise five-fold by 2035 to 10% of Australia’s total, and that a mismatch between datacentre and renewable project timelines could cause energy bills to skyrocket.
Federal Energy Minister Chris Bowen plans to push ahead with nationally consistent rules requiring new datacentres to underwrite renewable energy, offset their grid consumption, and shield consumers from price impacts. But Queensland and the NT dismissed the proposals as federal overreach.
“Queensland will always support proposals that deliver affordable, reliable and sustainable power, however, we will not support underdeveloped ideas that hand increased power to Canberra at the expense of Queenslanders,” said state treasurer and energy minister David Janetzki.
The NT’s energy minister, Gerard Maley, joined the opposition at Tuesday’s energy ministers’ meeting, according to a communique. All other states backed the commonwealth’s plan, which also includes mandating transparent reporting of energy use and emissions.
The federal government is exploring whether it can set price protections to shield Australians from bill spikes, and may invoke powers through the Australian Energy Market Operator and Australian Energy Market Commission to mandate renewables for new grid-connected datacentres.
Prime Minister Anthony Albanese had pledged to legislate binding standards for AI companies, including a “legal obligation” for new datacentres to underwrite new power supply, pay for grid connection costs, and “put at least as much energy into our grid as they take out of it.”
The stoush highlights a broader tension: datacentres can be built in 18 to 24 months, but transmission and renewable projects take three to five years. S&P’s report noted that delays in projects like Project Energy Connect in NSW and the Western Renewables Link in Victoria could tighten supply and increase costs.
S&P cited estimates from the Australian Energy Market Operator that datacentre energy use could hit 20 terawatt hours by 2034-35, and Sydney Water’s projection that datacentres could consume 15% to 20% of the city’s water by 2035.
Public sentiment is wary. A Guardian Essential poll this week found less than a third of Australians would welcome a datacentre in their area; 61% worried about energy demand and prices, 44% about water supply, and 41% about environmental impacts and noise.
Bowen is set to reveal more details at the National Press Club next week, ahead of a national cabinet meeting in August and another energy ministers’ summit in September. Federal sources insist the opposition from Queensland and the NT will not derail the roadmap.
