The nation has about 1.6 gigawatts of data centre capacity, which is likely to extend to three gigawatts by the 2030 financial year.
Much of that capacity ought to be in regional areas, where there is adequate land for development and limited noise pollution near homes, Telstra executives told a government committee on Thursday.
But for that to happen, thousands of kilometres of physical network, including ramps that allow connection points for regional hubs, need to be built.
Telstra is creating 30 of those connection points across the country through its Aura Network, expected to cost $1.8 billion.
"Our role is to ensure that all Australians can participate in this digital economy," head of Telstra digital infrastructure Steven Worrall said.
Community backlash about data centre locations has grown in recent years.
Developer The Goodman Group abandoned plans for a $1.2 billion project in Sydney's Lane Cove after intense scrutiny about its location near homes.
In September, AI giant Anthropic signed a deal for a $32 billion data hub in Queensland's Western Downs. It would be the largest centre of its kind in the country, and one of the only large-scale sites based rurally.
Though it is expected to inject revenue into the surrounding towns, some locals are concerned their businesses will be steamrolled.
The government inquiry has been hearing about these sorts of tensions for several days as it probes businesses, big tech and advocacy groups on Australia's AI future.
It's an issue being grappled with at an international level.
Prime Minister Anthony Albanese this week met with Father Paolo Benanti, who has advised the Vatican on AI take-up, about Australia's role globally.
Like many countries, Australia is planning to bring in national AI standards.
They are set to be drafted by the end of the year and will require newly built data centres to offset all of their electricity consumption with renewable energy investment.
"We know the government's new rules push us to 100 per cent (renewable power), everyone is on board with that," Data Centres Australia chief executive Belinda Dennett told the committee on Thursday.
"What we have to do is get the mechanisms right to ensure those renewable energy projects can be built at the same pace as data centres can be built, because at the moment there's a mismatch in timing."
Australia was at risk of missing the boat, the MPs and senators heard.
"We need to speed up our renewable energy progress rather than slow down our data centre progress because if we slow down, that capital will move elsewhere," Ms Dennett said.
Data centres are in a battle to solidify their social licence, with some states, including Victoria, cracking down on companies and no longer allowing them to build warehouses in residential areas.
In NSW, the Lane Cove community successfully campaigned against plans for a now-scrapped centre just 150 metres from a school. Other neighbourhoods are following suit.
The facilities are expected to account for 10 per cent of Australia's electricity demand by 2050, up from about two per cent today.
But the companies insisted they had always pulled their weight and were not on the hunt for loopholes.
"There's no free ride in there," Ms Dennett said.
"We've always paid for our own energy use ... and there's no tax incentives to build data centres in Australia."
While Labor has copped criticism for being sluggish in legislating the standards announced by Mr Albanese in July, the committee heard Australia was actually ahead of the curve on cushioning the electricity market against the AI boom's demand.
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