MELBOURNE, AUSTRALIA / RankWire.AI / – The Australian Energy Market Operator reports a notable surge in electricity demand driven by an increasing number of data centre projects across Australia. Currently, 225 data centre initiatives are in the connection pipeline, up from 97 just a year earlier. Existing operations number around 165 data centres across the National Electricity Market. Their annual electricity consumption is close to 5 terawatt hours, accounting for approximately 3% of the market’s total usage.
AEMO projects that energy use by data centres could reach roughly 34 TWh by 2035-36, representing about 13% of the total market consumption. Under a high-growth scenario, demand might climb to nearly 52 TWh within the same period. The National Electricity Market serves eastern and southern Australia but excludes Western Australia and the Northern Territory. These figures underscore how rapidly large-scale computing facilities are becoming key contributors to new grid demand.
Overall, total electricity consumption in the market is expected to grow substantially over the next decade. AEMO forecasts an increase from approximately 176 TWh in 2025-26 to about 250 TWh in 2035-36, marking a growth of over 40%. This rise is driven not only by data centres but also by broader electrification in households, industry, and businesses. The projected 34 TWh demand from data centres is nearly equivalent to the current electricity used by households across New South Wales and Victoria combined.
Data Centres Add Strain as Older Power Plants Phase Out
Australia’s energy system must accommodate this growth amid scheduled plant retirements. Over the next ten years, about 15 gigawatts of coal and gas generation capacity will be decommissioned. Meanwhile, new generation and storage facilities are entering the grid, with roughly 9.1 GW of new capacity connected during 2025-26, setting a record for annual additions. AEMO also lists approximately 40 GW of committed and expected generation and storage projects planned for delivery by the early 2030s.
The most recent reliability assessment indicates no expected reliability gaps before 2030 under AEMO’s central forecast. This outcome is attributed to increased investments in generation, storage, and transmission infrastructure. However, it emphasizes the importance of timely project completion as older power stations exit the market. Reliability gaps are planning indicators used when future supply may fall short of required standards, but they do not predict actual blackouts. AEMO continues to monitor demand growth alongside shifts in the market’s generation mix.
Government Initiatives Target Energy and Grid Cost Management
The federal government has introduced proposed national standards for large data centres, focusing on electricity supply, grid expenses, and water consumption. These standards would obligate major facilities to support new power sources and share connection costs. Additionally, large operators would be required to curtail consumption as needed to maintain grid stability. Measures aimed at enhancing water efficiency are also included. Legislation is targeted for early 2027, as data centre electricity demand becomes an increasingly significant component of national energy strategies.
The Australian Energy Market Commission has also proposed new requirements for large data centres connecting to the grid. Their recommendations include ensuring access to clean, firmed electricity and increasing flexibility in power usage. They also address issues related to market registration, infrastructure costs, and the impact of large new loads on existing consumers. These proposals complement AEMO’s updated demand outlook, illustrating that while the data centre pipeline has more than doubled, electricity use across Australia’s main power market continues to grow.