Albanese's rare concession in the energy wars is revealing

As is so often the case in Australia, the politics came down to a fight over energy. Should the data centre boom be powered by renewables or fossil fuels?

It's a fault line that's defined Australian politics since well before the artificial intelligence revolution came along.

Yesterday the prime minister gave some ground.

'Not all states are exactly the same'

He still wants all new data centres to be powered by additional investment in renewables rather than coal or gas, and the view within the federal government is that's exactly what the market will decide to do anyway.

But the "renewables only" demand being emphatically made before the National Cabinet meeting didn't make it into the final communique.

"Not all states are exactly the same," the prime minister acknowledged after the talks, agreeing on the need for a "flexible" approach.

The Queensland premier and Northern Territory chief minister, who both went into the meeting insisting they should be free to make their own energy choices, emerged claiming a "win".

The new rules haven't been finalised. A further leaders' meeting will be held later this year before new federal laws are introduced in 2027.

But Anthony Albanese's shift to a more flexible approach for Queensland and the NT — a rare concession in the energy wars — is revealing.

He doesn't want a drawn-out battle, potentially involving a Commonwealth override, when in his mind, data centres will end up being powered largely by renewables anyway.

He is instead prioritising a speedy settlement of nationally consistent rules to ensure investment can proceed.

Behind the brawl there's consensus

The classic Australian political brawl over energy, masks an important point. Both major parties, at both federal, state and territory levels, want this data centre boom to happen.

In other parts of the world, it's hard to imagine such bipartisan consensus.

In the US, this has become one of the hottest political bunfights, and not just along traditional party lines.

Donald Trump is hungry for the "tremendous amounts of jobs and money" these so-called "bit barns" can create. Various fellow Republicans in Ohio, Michigan and Pennsylvania, however, want to hit the brakes. The Republican Governor of Texas has ordered an effective pause on approvals in his state.

Here, the government has been trying to get ahead of any serious community backlash.

The prime minister is effectively pledging to insulate Australians from the dark side of data centres.

Under his plan, which now has agreement from state and territory counterparts, no one would face higher bills or be required to live alongside gormless, noisy server farms.

But even if Australians can be convinced data centres will do them no harm, there's still a big question. What benefit they will bring?

Important unanswered questions

Multiple polls suggest most aren't sure of the answer. They show voters hold a range of concerns, beyond the impact of data centres on power and water.

This presents a challenge for the government. Bringing Australians on this journey will require more than simply assuring them it won't hurt. The upside needs to be sold too.

The argument in favour of data centres typically focuses on the enormous global investment required to build them.

"This is one of the biggest investment booms not just in our lifetimes, but in modern history," notes Andrew Charlton, the assistant minister for science, technology and the digital economy.

But even if the initial investment in construction is bigger than the mining boom, what ongoing revenue or "rent" might Australia extract from housing these centres here once they're up and running?

In an in-depth conversation on "The Joe Walker Podcast", Charlton expressed some doubt.

"Will we be able to extract rents from them, or will they be commodities in the global supply chain? Unanswered question. Important unanswered question," he acknowledged.

Security and industry benefits

Other benefits, however, are more obvious to those in government.

There's a privacy and security benefit from holding and processing sensitive Australian data on Australian soil.

There's the potential to collaborate with US tech giants beyond data centres, to help build a stronger local industry for AI start-ups and researchers.

And then there's national security.

Former head of the Australian Signals Directorate Rachel Noble has argued housing data centres here is "absolutely" critical to leveraging access to the best AI models.

Without them, the argument goes, Australia risks missing out on early access to the models that will be vital for the nation's cyber defence.

The prime minister's effort to progress a national agreement on data centres yesterday suggests he is prioritising these potential economic and security benefits. Even if that's required adopting a more "flexible" approach on energy to the one he and his ministers had been so forcefully arguing before yesterday's meeting.

There are enough other fights with the states right now.

Settling a common set of rules on data centres is aimed at both attracting critical investment and avoiding the political blowback unfolding in other parts of the world.

David Speers is national political lead and host of Insiders, which airs on ABC TV at 9am on Sunday or on iview.