Australia’s Energy Dilemma: AI Demand Meets a Renewables Push
Australia’s electricity story has entered a new phase. After a record shift toward solar and wind, which outperformed coal on a national scale for the first time in September, the spotlight now shines on how to sustain this momentum. The Australian Energy Market Operator’s (AEMO) 2025 Electricity Statement of Opportunities underscores a looming squeeze: artificial intelligence data centres are expected to drive electricity demand up by 25 per cent a year for a decade, with electrification of transport and households adding to the surge. In short, AI is accelerating the move toward a cleaner grid, but it also raises questions about reliability, affordability, and the speed at which renewables alone can meet growing, non-discretionary demand.
Rooftop solar adoption remains strong—nearly 40 per cent of households now have solar panels, contributing about 13 per cent to the national market in the year to June. Yet as penetration nears saturation, growth in rooftop solar will slow, leaving the grid to juggle a rapidly expanding load. AEMO’s projection points to a future where data centres, manufacturing, and other energy-intensive industries increasingly compete for the same electrons that households rely on for daily life.
The Nuclear Question and the Fusion Opportunity
Australia’s policy landscape compounds the challenge. The federal government and states have maintained a moratorium on nuclear power, limiting options for large-scale, continuous baseload generation. That leaves the grid leaning on batteries, pumped hydro, and other storage solutions to smooth the intermittent supply of wind and solar. Even in places with fewer political obstacles, nuclear faces cost and safety trade-offs that complicate rapid adoption.
Into this mix steps fusion energy, a technology long described as the “energy of the stars” but historically dismissed as always decades away. The central appeal of fusion is simple to state but profound in implication: a virtually limitless, clean power source using abundant hydrogen isotopes from water, with by-products that are far less hazardous than conventional nuclear fission. If fusion can move from lab-scale experiments to reliable, scalable electricity, it could redefine the economics of the grid and reduce price volatility tied to fossil fuels.
Global Momentum, Australian Roles
Globally, researchers and investors are rallying around fusion, driven by a desire for durable energy security. In Chengdu, the International Atomic Energy Agency hosts a pivotal fusion conference at a time when dozens of experimental devices and several dozen proposed designs are advancing. Australia, while not yet a manufacturing powerhouse in fusion, has notable players shaping the narrative. Two Australian outfits—HostPlus, a major superannuation fund, and a small private Adelaide-based company HB11—are active in the field and illustrate the domestic interest in fusion’s potential.
HostPlus has committed about $330 million for a 4 per cent stake in Commonwealth Fusion Systems (CFS), a U.S.-based company at the forefront of commercial fusion development. For HostPlus, fusion represents a potentially transformative investment with the prospect of decades of clean, abundant power feeding into the Australian economy. HB11, leveraging laser-based fusion research, is building a pilot program in Adelaide. Its leaders argue that laser-driven approaches can accelerate practical fusion energy, with a 2030s timeline floated for a pilot fusion power plant.
Why Fusion Could Change the Energy Equation
Two factors make fusion particularly compelling for Australia’s energy transition: stability and climate impact. Fusion’s potential to deliver continuous power could address the reliability gaps that renewables alone struggle to fill. At the same time, the environmental footprint of fusion—primarily water as fuel and helium as a benign by-product—offers a cleaner alternative to fossil fuels and a more policy-friendly option than some traditional nuclear paths.
Industry observers suggest a future where fusion may not necessarily be cheaper than solar or wind on day one, but it could become a compelling complement to renewables and storage, reducing marginal costs and providing resilience during peak demand. The stakes are high: the next decade could see a shift from a fossil-heavy grid to a diversified mix that includes fusion as a cornerstone technology alongside batteries, pumped hydro, and other innovations.
What Lies Ahead for Australia
While the word fusion did not appear in AEMO’s current 10-year outlook, the mood in policy and investment circles suggests it will feature prominently in future forecasts. As the nation contends with rising AI-driven electricity demand and the retirement of several coal-fired stations, the fusion conversation offers a hopeful thread: a technology that promises abundant, clean power could help Australia balance reliability with its ambition for a lower-emissions economy.
Australia’s fusion journey remains in its early innings, but the global surge in fusion activity—paired with strategic investments by Australian funds—signals a broader shift. If fusion continues to mature, it could become a central pillar of the energy mix, easing the pressure on the grid and helping to keep electricity affordable for households and businesses alike.
