The Collision of AI and Clean Energy
Two of the era’s defining revolutions—artificial intelligence and renewable energy—are colliding in Australia, reshaping ambitions for a resilient, low-carbon grid. Recent shifts show solar and wind surpassing coal in September, a milestone echoed globally. Yet the same forces propelling AI forward—enormous energy needs from data centres and electrified transport—pose challenges that renewables alone may struggle to satisfy.
AEMO’s Forecast and the Energy Crunch
The Australian Energy Market Operator (AEMO) warned in its 2025 Electricity Statement of Opportunities that data centres could drive electricity demand up by about 25 per cent annually for a decade. Paired with transport electrification and household switches, demand could outpace growth in other sectors. While rooftop solar now powers a significant share of households, its growth is slowing as saturation nears. The risk is that high AI-driven demand will squeeze out traditional industrial users and push wholesale prices higher, particularly during periods when sun and wind alone can’t deliver constant power.
The Nuclear Question and Storage Solutions
Australia’s policy stance—restrictive on nuclear energy—complicates the path to steady baseload power. With 16 coal-fired stations slated for retirement in the next decade, and limited, politically fraught options for a reliable substitute, the grid’s stability increasingly hinges on effective energy storage and diversification. Grid-scale batteries, pumped hydro, and other storage technologies will play pivotal roles as the country decarbonises while accommodating AI-driven demand spikes.
The Global Fusion Breakthroughs and Australia’s Stake
Fusion energy—fuelling power with hydrogen isotopes to release energy without long-lived radioactive waste—offers a potential long-term solution. Unlike fission, fusion fuel is abundant and water-based, with the prospect of near-limitless clean energy if technical hurdles are overcome. Australia is staking a claim in this frontier through notable investment and collaboration.
International activity is accelerating. In Chengdu, the IAEA hosts its 30th global fusion conference amid a landscape of hundreds of experimental devices and more than 20 proposed plant designs. Within Australia, two notable players are driving momentum: the investment arm of Hostplus and a Sydney-based startup, HB11. Hostplus has committed about A$330 million for a 4 per cent stake in Commonwealth Fusion Systems (CFS), a leading US contender in commercial fusion. HB11, pursuing laser-based fusion, is building a pilot program in Adelaide and positioning itself as a potential global player in the laser approach.
Why Fusion Now Makes Sense for Australia
Fusion is not only about undeniable scientific curiosity; it’s about practical energy security. If fusion matures, it could complement existing renewables by delivering stable, low-emission power that isn’t constrained by daily weather patterns. For data centres, a fusion-based micro-generation capability could reduce exposure to wholesale price volatility and help green-light ongoing AI expansion without sacrificing reliability. As Hostplus’ Sam Sicilia notes, fusion could reshape the energy mix “in our lifetime,” with planning cycles compressing to a five-year horizon as technology advances.
What Comes Next for Policy and Industry
Australia’s authorities are likely to integrate fusion developments into longer-range electricity outlooks, even if the current official roadmaps don’t yet reference it explicitly. The key questions involve research funding, regulatory frameworks, grid integration tests, and the economics of a prospective fusion-enabled era. While the near term will still rely heavily on expanding and stabilizing renewables and storage, fusion research signals a broader strategy: diversify energy sources to curb AI-driven demand risks while pursuing a safer, cleaner energy future.
Conclusion: A Path to a Fusion-Ready Australia
As AI accelerates electricity consumption and renewables face intermittency challenges, Australia is positioning itself at the cutting edge of fusion research and investment. If successful, fusion could deliver abundant, clean power that complements solar and wind—and ultimately reshapes the country’s energy mix for decades to come.
