Data centres might not be the first thought in the energy conversation, but they are fast becoming one of its most crucial players.
As artificial intelligence booms and computing requirements soar, data centres are emerging as major electricity users, but they may also be untapped energy assets.
At Australian Energy Week 2025, Telstra Energy’s Head of Strategy, James Gerraty, gave insight on what Telstra is doing to turn its data centres into engines of energy efficiency.
“We’re all concerned with what’s going to happen to our grid,” Gerraty said.
“There’s no shortage of capital looking for a home in data centres, and no shortage of compute requirements looking for a home – but are we doing enough thinking about the implications for the grid we have?”
Beyond backup
Most people associate data centres with energy-hungry cooling systems and banks of blinking servers, but behind the scenes, they are also home to substantial power infrastructure such as backup generators, flywheels, and increasingly, large-scale batteries.
These are not just safety nets for blackouts, they are flexible assets that can be used to respond to market conditions.
“Over the last couple of weeks, we’ve seen prices at $10,000 or $15,000 a megawatt (MW), per hour,” Gerraty told the audience.
“More than 100 Telstra sites responded to that – discharging batteries, firing up generators – and reducing exposure to those prices.”
Telstra’s use of on-site assets recently offset around 100 MW of grid demand during peak events in Victoria, avoiding extreme wholesale prices and easing pressure on the market.
According to Gerraty, this responsiveness delivered cost savings not only for Telstra, but also contributed to lower prices for other consumers.
“It’s not only saving us money. It’s saving all of you money,” he said.
“If you’re an energy consumer, then resources like this being brought to bear are not just good for us – they’re good for the system.”
Idle capacity, blocked potential
However, much of the on-site generation capacity that could assist the grid during stress events is sitting idle, unused – not for technical reasons, but because of regulatory inertia.
“A 10 MW data centre might have 30 or 40 MW of capacity that it’s able to dispatch,” Gerraty said.
“But if you don’t have permission to export all of that to the grid, it counts for nothing.”
While Telstra has explored exporting from some sites, the processes involved have proven a major deterrent.
“It’s a real pain,” he said.
“Even in cases where the grid could absorb it and it would do great things for us all, we just find it too hard.”
This bureaucratic lag is holding back what could be hundreds of megawatts in dispatchable capacity – capacity that could play a vital role in firming a renewable-heavy grid.
Safety in storage
As batteries become more central to energy infrastructure, questions around safety have come to the fore. Lithium-ion batteries, while efficient and widespread, carry well-documented fire risks.
Gerraty acknowledged the growing scrutiny and called for more consistency in how safety is approached.
“Lithium batteries have been forming part of the solution for industrial use cases in Europe and elsewhere for a long time,” he said.
“But it’s only now that the safety conversation seems to be picking up.”
He argued the risks are often overstated, particularly when compared to the myriad small lithium batteries in consumer devices.
“There’d be close to a billion lithium batteries in different formats in Australia. You can still probably count on your hands how many make the news for safety issues,” he said.
Nonetheless, Gerraty said there’s a clear need for agreed best practices.
“It would be nice if emergency services and engineering bodies all had a consistent view on what’s best practice when deploying lithium batteries – whether in a house, a data centre, or any facility,” he said.
“Now’s the time to get on the same page.”
Grid allies, not hogs
Despite the challenges, the potential for data centres to support the grid is becoming more real. Telstra, for one, is looking beyond just backing up its operations. It is investigating how compute loads and cooling systems could be reshaped to better align with renewables.
“Compute requirements are essentially a battery where they’re not time-sensitive,” Gerraty explained.
“It’s easy to shift that into the middle of the day, when power prices are lower.”
The same goes for cooling.
“Historically, you’d run air conditioning based on temperature thresholds, regardless of price. But nothing stops us from running it harder in the middle of the day and backing off in the evening peak.”
This kind of load shifting could become a major tool in managing grid stability as solar dominates daytime generation.
Solar at the edge
On the notion that data centres could be made more self-sufficient through on-site renewables, Gerraty is skeptical.
“Data centres are extremely energy-intensive,” he said.
“If we covered every square metre of roof space at a Telstra facility with solar panels, we’d get to about two per cent of our energy requirements.”
He said some new regional sites may be able to co-locate ground-mounted solar to offset more of their consumption, but for the most part, grid dependence remains unavoidable.
Still, Telstra has taken major steps to reduce its net footprint, including signing contracts to generate renewable energy equivalent to 100 per cent of its consumption – mostly from wind and grid-scale solar farms.
Securing the future
As data centres grow in importance and scale so do the risks, making cybersecurity a key gatekeeper for technology adoption.
“You could have the most useful device I’ve ever seen,” Gerraty said.
“But if it relies on over-the-air communication or remote diagnostics, we can’t use it.”
He urged tech providers to consider these constraints up front if they want to sell into the sector.
“We’ve dismissed so many solutions simply because there’s no safe way to deploy them based on how they’re built.”
Gerraty sees data centres not just as energy consumers, but as latent contributors to a smarter, more resilient grid.
“The assets are there,” he said.
“The challenge now is to get out of our own way.”