• NSW closed consultation on reforms intended to make large data-centre projects carry more of the network costs created by their electricity connections
  • Proposals include a A$30,000-per-MW entry bond and default major network upgrade fees of up to A$200,000 per MW

The fact

New South Wales closed its consultation on data-centre electricity reforms at 5pm AEST on 14 September. The proposals would change how large data centres connect to the grid and how network costs created by those connections are recovered.

As of July, the state said data centres were seeking up to 28GW of connection capacity, with around 13GW in advanced discussions. Those figures describe applications in the pipeline, not electricity already being consumed or capacity certain to be built.

The proposed framework would apply to data centres with rated connection capacity of at least 15MW. It includes an A$30,000-per-MW entry bond, take-or-pay arrangements for capacity made available, and a Major Network Upgrade Fee with default rates of A$200,000 per MW in Sydney-Newcastle-Wollongong and A$100,000 per MW elsewhere. Final measures depend on legislation and regulations.

The assessment

These rules could put real money on the table much earlier in a project. A developer asking for 100MW would have to lodge a A$3 million bond. If the default network-upgrade charge also applied, the same project could face another A$20 million in Sydney-Newcastle-Wollongong, or A$10 million elsewhere, before counting other connection work. Even where some money is eventually returned, it still has to be financed while the site is being developed.

It could also become more expensive to reserve extra power simply in case it is needed later. NSW is considering take-or-pay charges and binding demand profiles, so a campus that asks for 200MW but spends years operating well below that level may still be paying for capacity it is not yet using.

For BTW readers, that makes the quality of the 28GW connection queue more interesting than its size. The final rules will show how much unused capacity developers are still prepared to reserve once there is a real financial cost attached to doing so.

What to watch

Watch the government's response, passage of the amendment bill and final regulations for the bond rate, forfeiture conditions, network-upgrade fee, take-or-pay period and 15MW threshold. The first applications under the final rules should show whether developers trim connection requests, accept more flexible capacity or revise project budgets before committing to a site.