Victoria’s Gippsland region will soon be home to one of Australia’s largest artificial intelligence infrastructures.
Singapore asset management and management company Keppel plans to build a 720-megawatt data center worth $10 billion on a 123-hectare site near Morwell.
Located in the heart of coal country, the Hazelwood site has unique appeal to the data center industry due to its proximity to one of the state’s largest power nodes.
Located within the proposed Gippsland Renewable Energy Zone, the company said it would have the resources it needs to operate the center in terms of electricity transmission and water.
“We are in active discussions with hyperscalers and neoclouds regarding the future capacity the site will deliver, many of which have expressed strong interest in Melbourne, one of Australia’s fastest growing data center markets,” said Manjot Singh Mann, CEO of Keppel’s Connectivity Division.
“The site near Morwell offers significant scalability with competitively priced green electricity, non-potable water for cooling, and a clear path to low-latency fiber connectivity, making it an attractive location for a next-generation AI campus.”
Yallolun power station is set to become a hub for renewable energy. (ABC TV)
The deal comes after Energy Australia announced a proposal in November to convert the Yallourn coal-fired power station into a $5 billion low-carbon emissions hub to support a similar data center.
fast growing industry
Demand for data centers is rapidly increasing.
There are currently an estimated 4,000 data centers operating around the world, with Australia ranking in the top five.
Simon Wilson said the race to build data centers continues. (Provided by: Simon Wilson)
According to Fortune Business Insights, the global data center market is expected to grow from $269 billion ($398.7 billion) in 2025 to $584 billion by 2032.
Gippsland-based AI consultant Simon Wilson said data centers were critical to the operation of Australia’s technology infrastructure.
“When we query Google or chat with AI… it’s done by the data center,” he said.
”So it’s really just a giant factory full of computers that do things that your local computer can’t do.”
Australia is considered a major regional hub for data centres. (Provided by: Google)
Mr Wilson said the Morwell site was uniquely located to attract the data center industry.
“Providers are really looking for locations with power, and that’s a prime location for Gippsland,” he said.
“The national power grid has the most available transmitted power, and many major technology providers want to take advantage of that and connect their data centers here.”
The increased use of internet-connected devices in addition to AI services is driving demand for data center capacity in Australia and around the world.
Additional investment in data center capacity in Australia to meet demand is expected to exceed $26 billion by 2030, according to a 2024 report compiled by Mandala Partners.
“Catalyst” of change
If the center comes to fruition, it would be a turning point for the Latrobe Valley, which has struggled with high unemployment since the closure of the former Hazelwood Mine and the transition away from coal-fired power plants.
Sharon Gibson says the data center could bring new industry to the Latrobe Valley. (Provided by: Latrobe City)
Latrobe City Council Mayor Sharon Gibson said the council welcomed the new investment opportunity.
“We’ve done a lot of work to try to transform our economy…Given the situation with power plants, we have to think, ‘How do we get jobs here?'” she said.
”Therefore, we see this as a catalyst to transform the economy.”
Mr Gibson said the local authority would proceed with the planning approval process with Keppel.
Environmental groups have expressed concern that if the data center goes ahead, it could affect the region’s water supply.
Tracy Anton said the community needs more details. (ABC News: Jarrod Whittaker)
Tracy Anton, an organizer with Friends of Latrobe Valley Water, said the group was not opposed to the data center but needed more information about how the project would source water and how it would be managed with other competing interests, including planned mine remediation.
“Everyone is wondering: Where is this water coming from? What are they going to do? How does this intersect with mine remediation?” she said.
”We must ensure that drinking water is protected…that is where we will focus our attention.”