Ireland’s Green Energy Rule: What Can Australia Learn From Its Approach to Data Centres?

Generation is additional so long as it

-Is not already operational in the market

- Has not been previously contracted or committed

- Is outside any government support schemes

Policymakers will need to consider whether government-funded generation counts as additional. This would include, for example, generation underwritten through schemes like the Commonwealth’s Capacity Investment Scheme (CIS) and NSW’s Long-Term Energy Service Agreements (LTESAs).

Additionality could be demonstrated through the purchase of Large-scale Generation Certificates (LGCs) or Renewable Electricity Guarantee of Origin (REGO) certificates, with the latter having attributes like time and jurisdiction that can be leveraged.

Data centres are required to meet at least 80 per cent of their annual demand with additional renewable electricity generated in Ireland (this is designed to align with the Irish Government’s target of 80 per cent renewable electricity in 2030).

Australia currently has an 82 per cent renewable energy target by 2030, with different state targets sitting underneath that.

While symmetry can be visually appealing, policymakers will need to weigh the barrier to entry this might impose, noting there is less time for preparation here than in Ireland which has been consulting on their policy for some time.

Australia’s federated structure may also complicate target setting, with Queensland already disagreeing on the need for additionality as expressed in the Energy and Climate Change Ministerial Council (ECMC) Communique from May 2026.

Data centres have a 6-year glide path from the date of demand site’s energisation in order to meet the above 80 per cent annual requirement.

As part of the grid connection application, data centres must show a credible plan in relation to how they intend to meet that 80 per cent. This includes, for example, identifying the specific renewable generation that will support the projects and the anticipated timeline for development.

While there are project variables, research from Net Zero Australia suggests large-scale wind projects take around eight years to develop, while solar farms are over five years on average.

Even with financing from data centres, supply-side barriers like planning approvals, social licence, and access to critical electrical equipment means it is difficult to build renewables quickly.

Policymakers should also consider how any requirement would interact with the Electricity Entry Services Mechanism (ESEM) which is set to kick in late 2027.

Small data centres are required to provide an auto-producer unit that meets 100 per cent of demand on a de-rated basis.

Large data centres must provide dispatchable generation and/or storage capacity equivalent to their peak demand.

Because there is no renewable requirement, these requirements along with the glide path have received criticism for allowing fossil fuel generation to be used in the interim. Some environment groups have taken legal action against the decision on this basis.

Noting that the Renewable Energy Target (RET) and related LGCs wind down in 2030, there is likely to be a reasonable volume of existing renewable generation looking to re-contract.

Policymakers may be interested in encouraging some contracting with existing renewables during any glide path or transition period to minimise emissions but also maintain commercial incentives for existing renewable generation.

While data centres can use on-site or proximate generation, it must be separately connected and metered and participate in the wholesale electricity market as a standalone market unit. Islanded data centres are not permitted.

The System Operator, not the data centre, will have responsibility for dispatch.

Despite pushback from data centre developers about logistical and financial burdens, the Commission determined this is necessary for system security and to maintain control over generation access in the event of data centre non-compliance.

While some data centre developers prefer total behind-the-meter solutions to avoid grid connection delays, policymakers should weigh that against the benefits of grid-connected investment.

The National Electricity Market has design features intended to expose large loads to the cost of new entry through scarcity pricing (such as the market price cap) and the forward market to ensure the efficient economic pooling of risk.

Further, grid-connection reduces the risk of stranded assets and under-utilised build, allowing for generation to be used elsewhere even when the data centre shuts down.

Given’s Ireland’s small geography and unitary government structure, their location requirement may not be too instructive for the Australian context.

The ECMC Communique has a “state of operation” requirement which presumably means the generation must be located in the same state jurisdiction as the data centre.

There will be intrigue over how policymakers approach this topic as it seems to go against the NEM’s intended design features which is to enable efficient investment in generation through an interconnected wholesale electricity market.

Further, noting that most prospective data centre projects are aiming to be located in Melbourne or Sydney, it could increase the risks of network congestion and inefficient build if generation cannot be spread across the NEM.

There is no requirement for data centres to provide demand flexibility contribution to the system.

The Commission reasoned that requiring onsite or proximate generation was enough and mandating demand flexibility on top would be too onerous. Furthermore, they placed confidence in emerging market initiatives and network options to smooth demand.

The ECMC Communique has tasked policymakers with ensuring data centres provide demand flexibility options to reduce costs.

There are different options for achieving this each with their policy trade-offs:

- Back-up (behind-the-meter solutions have a role, but it tends to be less efficient and can risk becoming stranded. Further, policy design should ensure that low emissions back-up, such as batteries, is incentivised over emissions intensive options like diesel).

- Load shifting (while tariff signals can be an efficient tool, the incentives for behavioural change may only be strong enough for certain data centre use cases, such as non-critical processing).

- Market directions (the most blunt and direct instrument but also carries significant costs and not a sustainable long-term option to maintain system security).