A Sydney data centre that will host ChatGPT is being hailed as a win for Australia, but an expert warns the country lacks the energy supply needed to power it reliably.
NEXTDC’s plans for the 650 megawatt data centre – the biggest in the Southern Hemisphere – have been revealed after the Aussie company secured OpenAI as an anchor tenant.
The centre in Eastern Creek, Sydney will be used to process queries from Australian companies using OpenAI products like ChatGPT.
At full load, it will draw enough power at any one time to supply roughly 780,000 homes.
Saul Kavonic, head of energy research at MST Maquarie, welcomed the project as a significant step towards “Australia’s technology future”.
He said “sovereign” data centres, like the Australian-based and -owned NEXTDC project, were “key to national security and data privacy”.
But he argued that major energy upgrades and policy changes were needed to support it, as the country struggles with soaring energy costs and a heightened risk of blackouts.
“Energy policy is struggling to meet current demand, let alone data centre-driven demand growth,” Mr Kavonic told news.com.au.
“Electricity network upgrades are now the critical path for Australia’s data centre build out.
“It can take over five years to augment a substation to enable new data centre growth, and over ten years if more substantial network upgrades are required. These ridiculously long lead times are holding back Australia’s technology potential.”
A mix of poor planning and an “increasingly hostile regulatory landscape” was limiting Australia’s energy supply, he said.
“Insufficient energy investment is now placing a handbrake on the government’s data centre-driven technology and growth agenda.
“Australia has all the natural energy resources needed to have abundant energy supply for all these things.
“It is only energy policy failure that is causing energy shortages and higher prices, and holding Australia back from our technology potential.”
‘OpenAI for Australia’
The deal comes just days after the Albanese government unveiled its national AI strategy, aimed at accelerating Australia’s adoption of artificial intelligence across government and industry.
A central pillar of that plan will be investment in data centres, the power-hungry GPU facilities now driving the global AI boom.
Australia is trying to position itself as a regional data centre hub – not solely for the economic benefits, but because processing data locally is much safer than sending it offshore.
Artificial intelligence may help to address the country’s flagging productivity growth as it automates tasks and makes employees more efficient. But a recent Commonwealth Bank report argued it would require “businesses to be agile and adaptive as technology improves, something Australian businesses have historically struggled with”.
“So arguably Australia is likely to see both less, and a delayed increase to productivity stemming from AI,” the report concluded.
OpenAI CEO Sam Altman, for his part, thought Aussies were primed for the revolution.
“Australia is well-placed to be a global leader in AI, with deep technical talent, strong institutions and a clear ambition to use new technology to lift productivity,” Mr Altman said on Friday.
Along with the NEXTDC project, he also announced a broader “OpenAI for Australia” initiative that included partnering with the likes of CommBank, Coles and Wesfarmers to roll out “AI skills training”.
“Through OpenAI for Australia, we are focused on accelerating the infrastructure, workforce skills and local ecosystem needed to turn that opportunity into long-term economic growth,” Mr Altman said.
OpenAI has been competing with other hyperscalers – including Google and Microsoft – to secure data centre capacity for its products around the world. The company has committed about $1.4 trillion over eight years for data centre projects.
Those commitments have raised eyebrows among sceptics, given that OpenAI’s projected annual revenue was just $20 billion.
“Sam Altman is trying to woo and win a lot of Australian enterprise contracts at the moment,” said Martin Eftimoski, an AI researcher at the University of New South Wales.
“The deals they have signed here have put them head-to-head with Google.
“Australia matters because it is a net importer of technology and a large market. And we have had a bit of energy recently with a bit of capital injection into data centres and asset managers scoping it out for more.”
Whether or not the investments would pay off, Mr Eftimoski said, was the “big question in capital markets right now”.
“What will happen to these assets if, for some reason, they are not profitable to run? Which is a real possibility. Do they become stranded assets or does another use pop up for them?”
He added that despite the challenges of the renewable energy transition, he viewed renewables as “better for business” in Australia in the long run.
“We should be doubling down and accelerating the transition to renewables so that our grid can handle scaling it,” he said.
“In the short term, the only way to get the electricity that is being demanded by the AI data centres is to use oil and gas, basically.”
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