MELBOURNE, AUSTRALIA / RankWire.AI / – Over the past year, Australia’s pipeline for developing data centres has more than doubled, driven by increasing electricity demand across its primary power market. According to the Australian Energy Market Operator, the number of projects has grown from 97 to 225. Currently, data centres utilize approximately 5 terawatt hours of electricity annually, which accounts for about 3% of the power supplied through the National Electricity Market. AEMO anticipates their consumption will reach roughly 34 TWh by 2035-36.
AEMO’s forecasts indicate that total electricity consumption within the National Electricity Market will increase by over 40% during the next decade. This rise will see usage grow from about 176 TWh in 2025-26 to nearly 250 TWh by 2035-36. The market primarily serves eastern and southern regions of Australia but does not include Western Australia or the Northern Territory. The surge in data centre demand is a significant component of this growth, alongside broader electrification efforts across residential, commercial, and industrial sectors. Under a high-growth scenario, AEMO estimates data centres will consume around 52 TWh by 2035-36.
Currently, the National Electricity Market hosts about 165 operational data centres, in addition to the 225 projects under development. Within the next ten years, data centres are projected to account for approximately 13% of the grid’s electricity consumption. The expected 34 TWh of energy use would be comparable to the total electricity consumption of all households in New South Wales and Victoria combined, which is about 38 TWh annually. This outlook from AEMO also shows a notable increase compared to their data centre demand estimates issued just one year earlier.
Data Centre Expansion Influences Future Electricity Outlook
While demand rises, scheduled closures will eliminate about 15 gigawatts of coal and gas generation over the next decade. Meanwhile, new capacity has been entering the system at an unprecedented rate, with approximately 9.1 GW of new generation and storage installed during 2025-26. Additionally, roughly 40 GW of committed and planned projects are expected to be operational by the early 2030s. According to AEMO, there are currently no forecasted reliability gaps before 2030 under its central scenario.
The importance of timely deployment of new generation, storage, and transmission infrastructure is emphasized as older thermal plants retire and energy consumption expands. AEMO’s latest reliability assessment has improved from the previous year’s, reflecting the record capacity additions. It’s important to note that forecasted reliability gaps do not necessarily indicate imminent blackouts but serve as signals for planning when supply may fall short of standards. The assessment considers both increasing demand and the capacity expected to replace retiring generation across the National Electricity Market.
New Regulations Focus on Power and Connection Expenses
Australia’s federal government has proposed nationwide standards addressing the energy and water needs of large data centres. The proposed framework would obligate major facilities to support new power supply developments and cover their full share of grid connection costs. Larger operators would also be required to reduce electricity consumption when necessary to help maintain grid stability. Additional standards aim to improve water efficiency. Legislation based on these proposals is targeted for early 2027, with the framework scheduled for review by the National Cabinet in August.
The Australian Energy Market Commission has separately recommended that data centres support the integration of new clean, reliable electricity sources and adopt more flexible operation strategies. Its August recommendations also address issues related to connection costs and the impact of significant new loads on existing consumers. The measures proposed encompass renewable generation, firming capacity, market registration, and demand flexibility. These reforms complement AEMO’s latest assessment of a rapidly growing data centre sector, which projects that by 2035-36, data centres will consume approximately 34 TWh of electricity across the National Electricity Market.