MELBOURNE, AUSTRALIA / RankWire.AI / – Across eastern and southern Australia, the increasing deployment of data centres is poised to significantly impact the country’s electricity demand. Currently, the Australian Energy Market Operator reports 225 data centre projects in the connection pipeline, a substantial rise from 97 projects recorded just one year prior. Already, approximately 165 data centres are operational within the National Electricity Market, consuming nearly 5 terawatt hours annually—about 3% of the market’s total consumption.
AEMO predicts that electricity usage by data centres will increase to roughly 34 TWh by 2035-36, representing around 13% of the total consumption in the National Electricity Market. Under its high-growth scenario, demand could reach close to 52 TWh over the same period. It’s important to note that the National Electricity Market covers the eastern and southern regions of Australia, excluding Western Australia and the Northern Territory. These figures highlight how rapidly large-scale computing facilities are becoming a key contributor to new grid loads.
Electricity consumption throughout the entire market is expected to see considerable growth over the coming decade. AEMO forecasts annual usage will rise from about 176 TWh in 2025-26 to approximately 250 TWh by 2035-36, marking a growth of over 40%. This increase is driven by the expansion of data centres alongside widespread electrification efforts across households, industries, and businesses. The projected demand of 34 TWh from data centres alone now approaches the combined electricity consumption of households across New South Wales and Victoria.
Data centres intensify pressure amid retirement of older power plants
Australia’s energy system must accommodate this rapid growth despite scheduled plant closures that will reduce existing supply. Over the next decade, roughly 15 gigawatts of coal and gas-fired generation are set to retire. Meanwhile, new capacity additions and storage solutions are entering the market, with approximately 9.1 GW of new capacity connected during 2025-26, setting a record for annual additions. Additionally, AEMO’s list of committed and anticipated projects includes about 40 GW of generation and storage expected to come online by the early 2030s.
Current reliability assessments indicate no forecasted gaps before 2030 under AEMO’s central outlook. These projections are linked to increased investments in generation, storage, and transmission infrastructure. The report emphasizes the importance of completing new projects on schedule as older power stations retire. While reliability gaps can serve as early warning signals for potential supply shortfalls, they do not constitute predictions of blackouts. AEMO continues to monitor demand growth in conjunction with the evolving generation mix in the market.
The government’s policies aim to address energy costs and grid stability
To manage the rising electricity demand from data centres, the federal government has proposed national standards targeting energy supply, grid-related costs, and water efficiency for large facilities. These standards would require major data centres to support new power connections and share the burden of connection costs. Additionally, operators of large data centres would be obligated to reduce their energy consumption when necessary to aid grid stability. The proposed regulations also incorporate measures to enhance water efficiency. Legislation implementing these standards is targeted for early 2027, as data centre electricity use becomes an increasingly significant component of Australia’s energy strategy.
Furthermore, the Australian Energy Market Commission has put forward recommendations for new requirements for large data centres linking to the grid. The proposals advocate for a transition to cleaner, more reliable electricity sources and greater flexibility in power consumption. The recommendations also address issues related to market registration, infrastructure costs, and the impact of substantial new loads on existing consumers. These proposals, combined with AEMO’s updated demand forecast, reveal a pipeline of data centres that has more than doubled while Australia’s main power market continues to experience rising electricity use.