California’s data centre laws offer lessons for Australia
Australia’s consultation on mandatory standards for data centres closes this Friday, 9 October. While the government considers how to require developers to bring new renewable energy, we can look to our friends in California who have answered some questions.
Earlier this year, CZI called on data centres to Bring Your Own New Clean Energy (funkily abbreviated as BYONCE). In August, the Australian Energy Market Commission's advice recommended a renewable certificate obligation tied to new generation, firm capacity contracts, demand flexibility and network cost reforms. It also suggested data centres could draw on existing renewables at first, as long as they surrendered extra certificates later to make up the gap.
The Office of AI is now consulting on how these obligations should work in Australia. California’s approach gives us a useful comparison.
What California has legislated under Senate Bill 887
On 21st September 2026, California adopted laws introducing mandatory electricity tariffs for data centres and a separate pathway for streamlined environmental review. They required data centres to:
Meet their hourly electricity needs with 100% zero-carbon resources within five years of starting operations (with at least 75% from new projects)
Provide four hours of zero-carbon storage (ie. batteries) at forecast peak demand, and use onsite storage for grid demand response (ie. be flexible)
Maximise feasible behind-the-meter zero-carbon generation
Pay interconnection costs upfront and fund the grid and generation upgrades they need
Avoid increasing fossil-fuel use and sign binding community benefits agreements
Meeting these conditions rewards operators with a streamlined approval pathway. Great start, but also important to note that California has not imposed hourly zero-carbon supply on every data centre.
The accompanying Assembly Bill 2383 forces data centres to pay for the power they need, rather than passing on to consumers bills. Plus, big data centres have to sign up for at least ten years to connect to the grid; bail, and they cop a penalty. This goes for any data centre bigger than 25MW.
The questions Australia needs to answer
The Office of AI’s consultation paper asks how renewable obligations should be phased in, how “new” capacity should be defined and whether certificates should match electricity use during particular periods. It also asks what could encourage onsite generation, batteries and flexible demand.
California helps, but we also think Australia can improve on what they’ve done:
Make a deadline: Australia proposes to phase in new capacity over an unspecified period. Without a fixed deadline, interim milestones and penalties, this temporary allowance could become years of extra demand with no new supply to match.
Granular matching with renewable energy: An annual certificate balance can hide heavy demand in hours when renewables are scarce. Australia should account for when electricity is used, with a pathway to finer matching periods.
Show evidence of firming: Certificates alone don't show that demand is covered when supply is tight. Australia needs storage requirements that suit our grid and provide demand flexibility, informed by the AEMC's advice. CZI advocates for additional, firmed renewable energy, transparent reporting and enforceable delivery commitments. California’s framework still allows a quarter of qualifying supply to come from resources that are not newly developed. We should retain Australia’s focus on building new renewables while drawing on its stronger provisions for matching, storage and cost responsibility.
There is still time to contribute to the Australian consultation. Submissions should help settle how much new energy developers must bring, when it must arrive, which facilities are covered and how compliance will be checked.
Make a submission to the Office of AI before 5 pm AEDT, Friday 9 October.