Prime Minister Anthony Albanese had been pushing for mandates for AI data centres to provide their own renewable energy, as the use of the technology rapidly increases.
But Queensland and the Northern Territory received a carve out from the federal government following a national cabinet meeting on Wednesday, allowing for centres in those jurisdictions to be powered by coal and gas.
The backdown came a day after the grid operator warned energy demand from data centres was expected to rise by almost seven times over the next decade, adding the National Electricity Market should remain reliable into the 2030s if renewable projects are delivered on time.
Sasha Titchkosky, a member of the Sydney-based Lane Cove Responsible Planning community group that's been speaking out about a proposed data centre development in the area, said the carve outs set a dangerous precedent.
"It's just really a massive disappointment, and I think from our perspective, we feel like the communities are sort of being used as a political football in this sort of data centre discussion," she told AAP.
"The goalposts just constantly keep changing, and when you're fighting to protect your community and ensure that the things that are really important to your community hold true, it becomes very difficult to kind of be handballed from one side of the field to the other."
She said the move away from enforcing renewables for data centres to allow for coal and gas was a concern, just weeks after the proposed federal mandates were unveiled.
"It really sort of is a slap in the face for every voter out there that's concerned about climate change and also concerned about the impacts of data centres on their communities."
NT Chief Minister Lia Finocchiaro previously said the federal government had been overbearing with its regulations, and had called for gas from the territory's Beetaloo Basin to help power data centres.
But Environment Centre NT acting chief executive Bree Ahrens said data centres could escalate the use of gas in the Top End.
"Top End fracking isn't commercially viable in the current market, so data centres are being used as a Trojan horse for Beetaloo fracking - stuck in the exploration stage for over two decades – to finally move to production," she said.
"Water is life in the territory and we are calling for a ban on fracking and AI data centres before it's too late."
