Will Gippsland’s new data centre be powered by clean energy?

Renewable energy contracts might not be enough for the industry to mitigate its impacts, critics say.

Jacob Wallace & Huw Bradshaw
June 19, 2026

Data centres are becoming a larger part of Australia’s economy, with tech companies like Microsoft investing billions of dollars into building the energy and water-hungry warehouses across the country.

Now, centres are being built in Gippsland – prompting questions about how they will be powered.

What happened: On January 15, Singaporean company Keppel announced it had secured the rights to lease a 123-hectare site at Hazelwood to build and operate a data centre.

Part of the reason the company used to justify the site was it would be able to run on the numerous clean energy projects in the Latrobe Valley.

The site is within one of Gippsland’s Renewable Energy Zones (REZ), which the company said will help give the centre access to reliable and cheap energy.

Data centres use electricity and, in theory, can be run on 100 percent clean energy. The problem is that our electricity grid is not yet clean.

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Will they do it? Research Associate of Strategic Technologies at the United States Studies Centre, Johanna Lim, told the Monitor a lot of data centre companies are committed to running on 100 percent renewable energy by 2030.

🗣️ “Energy costs are one of the biggest expenses for data centres so there is an incentive to use cheaper renewable energy,” Lim said.

The problem: While around 35 percent of the electricity in Victoria comes from solar, wind and hydro projects, roughly 60 percent is still powered by burning brown coal.

Victoria is shooting for the grid to be powered by 65 percent renewables by 2030.

If the rate at which data centres are built outpaces the roll-out of new renewable energy, it means more coal and gas burnt.

According to projections from the Climate Change Authority, the Australian government’s scientific and economic advisors on how to cut emissions, this is currently what is happening.

While the issue is particularly pointed in the case of data centres, due to their abnormally large energy demands, the situation affects all large power users: manufacturers, major supermarket chains and even local councils.

According to Australia Energy Market Operator (AEMO), data centres account for 2 percent of grid electricity use. AEMO expects that to triple to 6 percent by 2030.

A straightforward solution exists: build the energy you’re going to use. While this can be done in the obvious way — erect a data centre next to a wind farm — these arrangements more commonly come in the form of a Power Purchasing Agreement (PPA).

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What is a PPA?

A company signs a long-term PPA with an energy producer.

If a data centre signs one of these agreements with a renewable energy supplier, the supplier could borrow against the guarantee to build a new wind or solar farm, meaning clean energy enters the grid as demand increases.

However, a PPA doesn’t have to involve the construction of a bespoke wind or solar farm, and can use energy sourced from renewable projects already built.

Is it so simple?

Critics of this system say a PPA isn’t good enough on its own. A recent report from Greenpeace, authored by Ketan Joshi, argued that companies need to show that they are increasing renewable energy supply to cover their own usage.

Otherwise, he said, “you end up with a false sense of progress”.

“This company comes up and says we're 100 percent renewable … but then you look at it from the perspective of the power grid … you have the wind farm that would have existed anyway, and a whole bunch of new demand from a data centre that they built, which ends up increasing fossil fuel use.”

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What do the experts say?

Jacqueline McKeon, research director at the Business Renewable Centre Australia, said all funding scenarios are complex, but that in essence data centres should be bringing new renewable energy into Australia.

“There should be an expectation on large energy buyers — particularly data centres — to be going a) 100% renewable, but b) additional. That way, they're really adding value to our grid and investment in renewables.”

What now?

The government is currently considering data centre regulations. These decisions are being led by a council of all Australian state, territory and federal energy ministers.