Artificial intelligence boom responsible for gas price increases: CSIRO GenCost report

The artificial intelligence boom is pushing up the price of gas technology, a report has found, helping to cement renewable resources such as solar and wind as the cheapest energy choices.

The CSIRO, Australia’s national science agency, released the findings on Wednesday in its 2026 GenCost report, which predicted electricity prices would continue to fall in the lead-up to 2030.

The results come after the price of oil surged by more than 10 per cent following renewed conflict in the Middle East, and as state and federal governments investigated the environmental impact of local data centre developments.

The eighth annual GenCost report, prepared in partnership with the Australian Energy Market Operator, analysed the cost of generating electricity using different technologies - from black coal and large nuclear reactors to gas and solar panels.

Researchers calculated the average cost of producing electricity in 2030 and 2050, and found solar panels and onshore wind farms were consistently the cheapest energy sources.

On the other end of the scale, small modular nuclear reactors and black coal with carbon capture and storage were the most expensive options, followed by large-scale nuclear reactors and gas with carbon capture.

Electricity prices would continue to decrease in the next three years, the report found, dropping from $104 per megawatt-hour in 2025 to between $80 and $90 in 2030.

But the price of gas turbines would keep rising for the next two years, GenCost lead author Paul Graham said, as the technology was deployed to power more data centres and meet AI demand.

“Something we had to take into account when we were doing our short-term projections for gas turbines is the US strategy of building data centres, big data centres, trying to build them quick, and often deciding to build dedicated gas turbines,” he told AAP.

“That has actually made US data centres the second biggest (consumer for) gas turbines in the world.”

Demand had already raised the price of the gas technology in the past four years, the report found, with four-hour battery storage becoming a cheaper option.

Researchers also analysed the impact of the US-led war with Iran on electricity prices, Mr Graham said, but found it was unlikely to raise the cost of solar or battery technology and its effects would be offset by slower economic growth.

“This is another in a series of inflationary events,” he said.

“We probably won’t see any improvement in costs in 2026 because of this.”

Despite short-term falls in electricity prices, the report warned the cost of producing energy after 2030 was likely to rise as ageing assets of all kinds needed to be replaced.