'Bring your own generation' - 3 sites where it's already built
The Prime Minster of Australia has just mandated data centres to be net-generators, not net users.
Here are three locations in the National Electricity Market where the generation and grid infrastructure already exists - Kurri Kurri in NSW, the Latrobe Valley in Victoria and the Port of Gladstone in Queensland.
As always, our Follow the Bottleneck analysis is framed as the path to power, not forcing ‘abundant land’ into a data centre proposal.
The Federal Government has announced establishing the Office of AI who are tasked with drafting the first ‘Australian Standards for AI’.
The new standards will set out clear rules for large data centres:
“Including a legal obligation to underwrite their own new power supply, pay their full share of connection costs so energy bills are not impacted, reduce power when needed to strengthen the grid, and be as water efficient as possible”1
Kurri Kurri NSW – An opportunity for the Federal Government to directly secure data centre revenue?
The former Hydro Aluminium smelter at Loxford in the Hunter is the only place in NSW where a data centre can co-locate next to new-build dispatchable generation on remediated industrial land.
The Snowy Hydro Hunter Power Station – 660 MW of dual-fuel open-cycle capacity – is now operating on the former smelter site. It was built as a gas peaker, which means it is sitting idle, generating as little as 5-7% of its annual potential.
There is an opportunity to secure a firming offtake with Hunter Power Station – thereby converting an under-utilised public asset into delivering the data centre being considered next door. A private flat load offtake is the first credible path to recouping the ~$2 billion build cost.2 The data centre gets firmed capacity, the Federal Government, who owns Snowy Hydro, banks the revenue.
The market has started moving. A 540 MW data centre has been proposed on the Hart Road, Loxford parcel of land in June 2026, with a scoping report lodged claiming a 14 month build. It is a clever use of the former smelter site, and it seeks to connect via the 132 KV switchyard, which will require new substation and switchyard upgrades to accommodate.
Latrobe Valley – Co-locate at coal fired power stations to access the already built 220kv and 500kV transmission lines
Victoria has 3 major coal-fired power stations in operation:
The uncomfortable reality is this coal fleet will be running for longer than expected as the renewable energy and the associated transmission build out has been too slow to replace the ~4,985 MW of coal generation. For instance, the Victorian Renewable Energy Zones were only declared on 29 May 2026, and the major transmission lines required to link up the proposed generation such as Western Renewables Link and VNI West are still in the planning stages.
Yallourn West and Loy Yang A have (undisclosed) agreements in place with the Victorian Government over closure timings and support for maintenance up to those dates. Loy Yang B does not. FTB analysis is government funded subsidies would be required if the coal plant life extends beyond 50 years.
This presents a really interesting location proposition for data centres, as the set up makes the location one of the very few places in the NEM where transmission already exists at the scale data centre loads require.
There is an existing 500kV transmission currently servicing Loy Yang A and B and 220kV connects into Yallourn West, it is a brownfield industrial area and VicGrid’s 2 GW of Gippsland Offshore Wind would be directed straight into Latrobe Valley once built. In addition, the Prime Minister is signalling that data centres are to ‘reduce power when needed’ as the load-flex obligation soon becomes law. This ruling strengthens the rationale to co-locate with on-site firming instead of a stranded, new grid connection.
In the short to medium term, data centres could co-locate at the coal-fired power station sites and secure baseload power alongside renewable generation PPAs while waiting for Victorian Transmission Plan’s 2 GW of Gippsland Offshore Wind by 2032, and 4 GW by 2035 which routes straight into the Latrobe Valley.
EnergyAustralia are looking to convert Yallourn West into an energy precinct combining up to 300 MW of gas generation and up to 2,700 MW of new large-scale storage3, with data centres explicitly named as target customers. Similarly, Loy Yang B plans to construct a synchronous condenser and a 500 MW battery at the site – delivering a firmed power story very few other locations in the NEM can offer.
And adjacent to the coal-fired power station owners, AusNet is rebuilding the Loy Yang switchyard replacing circuit breakers across 2028 to 2030, presenting a live opportunity before this scope of work is locked in.
Loy Yang wins regardless of the Victorian State Election on 28 November 2026.
If the Coalition wins, the offshore wind plan will likely be scrapped and coal-fired power will be ordered to stay open for longer. Data centres – having secured the necessary firming power – would continue to underwrite new storage and solar generation required for its large load, complying with the ECMC and now Office of AI mandate.
And if Labor wins, existing VicGrid plans remain in place and a data centre just has to wait for the Gippsland Offshore Wind to be built and the electrons to flow directly into Latrobe Valley.
Port of Gladstone – first mover advantage
Port of Gladstone is a deep-water port and industrial site, with a 275 kV network built to support the precinct. Queensland’s largest generator, the 1,680 MW Gladstone Power Station is set to retire in March 2029.
The precinct’s energy system is currently being rebuilt as Rio Tinto has contracted approximately 2.7 GW of wind and solar (Bungaban, Upper Calliope, Smoky Creek and Guthrie’s Gap) plus a 600 MW / 2.4 GWh battery.
A re-powered industrial precinct oversupplied with daytime renewable energy and anchored by a $2 billion Commonwealth-Queensland support package is exactly the set up where a new large load improves the economics for the entire industrial site.
The opportunity is to option land in the Gladstone State Development Area, approach Fortescue about the Gladstone Electrolyser Manufacturing Centre which was cancelled in May 2025 or engage with CS Energy about the retiring power station site, before it is sold as a marketed opportunity.
Article #6 flagged Queensland as the one NEM jurisdiction outside the ECMC offset mandate. Assuming the Office of AI overrides that distinction, the Port of Gladstone opportunity is the ‘underwrite new power supply’ story the new AI Standards will demand.
What this means for investors
Snowy Hydro has a peaker without a revenue base and every retailer in NSW starts bidding for its generation when Eraring exits in April 2029. EnergyAustralia is marketing an energy precinct but does not yet have an anchor tenant on an asset closing in 2028, and Queensland has a closing power station, a 275 kV network and capacity for a successor industry. A data centre can be the answer to all three propositions.
We maintain the data that sits behind this analysis. If you want to stress-test the power story before you commit, this is the work we do privately: info@followthebottleneck.com
Not investment advice. This article uses public information only and its content is general in nature.
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