MELBOURNE, AUSTRALIA / RankWire.AI / – The main electricity grid in Australia is poised for a significant increase in demand driven by rapid growth in data center development. According to the Australian Energy Market Operator, there are currently 225 data centre projects in the connection pipeline, a notable rise from 97 projects just one year earlier. Currently, around 165 data centres operate across the National Electricity Market, with their annual electricity consumption close to 5 terawatt hours, which accounts for roughly 3% of overall market consumption.
AEMO forecasts that electricity used by data centres will increase to approximately 34 TWh by 2035-36, raising their share of the National Electricity Market’s total to about 13%. Under a high-growth scenario, this demand could reach nearly 52 TWh in the same period. The National Electricity Market encompasses eastern and southern Australia, excluding Western Australia and the Northern Territory. These figures highlight how rapidly large computing facilities have become a key contributor to new grid demand.
Total electricity consumption across the market is expected to grow substantially over the next decade. AEMO estimates annual usage will rise from around 176 TWh in 2025-26 to roughly 250 TWh by 2035-36, representing over 40% growth. This increase is driven not only by the expansion of data centres but also by increased electrification across households, industries, and businesses. The projected 34 TWh of data centre demand is nearly equal to the combined electricity consumption of households in New South Wales and Victoria.
Data Centres Increase Strain as Old Power Plants Phase Out
Australia’s electricity system must accommodate this growth while existing supply diminishes due to scheduled plant closures. Over the next decade, about 15 gigawatts of coal and gas generation will be retired. Concurrently, new generation and storage capacity are entering the grid. During 2025-26, approximately 9.1 GW of new capacity was connected, setting a record for yearly additions. Additionally, AEMO has listed roughly 40 GW of committed and planned generation and storage projects expected to be operational by the early 2030s.
According to the latest reliability assessment, there are no predicted reliability gaps before 2030 under AEMO’s central forecast. The agency attributes this stability to increased investment in generation, storage, and transmission infrastructure. It emphasizes the importance of timely project completion as older power stations shut down. Reliability gaps, which serve as planning indicators when supply may fall short of requirements, do not imply imminent blackouts. AEMO continues monitoring demand growth alongside the evolving generation mix within the market.
Government Initiatives Aim to Tackle Energy and Grid Cost Challenges
The federal government has introduced a proposed national framework for large data centres, addressing issues like electricity supply, grid expenses, and water usage. This framework would mandate that major facilities support new power sources and share connection costs. It also requires large operators to curtail consumption when necessary to maintain grid stability. Included in the standards are measures to enhance water efficiency. The government plans to introduce legislation by early 2027 as electricity demand from data centres becomes a more prominent element of Australia’s energy strategy.
Additionally, the Australian Energy Market Commission has recommended new requirements for large data centres connecting to the grid. These proposals advocate for cleaner, more reliable electricity supply and increased flexibility in power consumption. They also address market registration procedures, infrastructure costs, and the impact of larger loads on existing consumers. Alongside AEMO’s updated demand outlook, these recommendations reflect a pipeline of data centres that has more than doubled in size, even as electricity use across Australia’s primary power market continues to grow.