MELBOURNE, AUSTRALIA / RankWire.AI / – Australia’s primary electricity market is expected to experience a significant increase in demand due to the rapid growth of data centres. The Australian Energy Market Operator reports that there are now 225 data centre projects in the connection pipeline, up from 97 projects just one year earlier. Currently, approximately 165 data centres operate throughout the National Electricity Market. Their combined electricity consumption is close to 5 terawatt hours annually, representing about 3% of overall market use.
AEMO forecasts that electricity use by data centres will reach roughly 34 TWh by 2035-36. This would increase the sector’s proportion of the National Electricity Market’s total consumption to approximately 13%. Under its high-growth scenario, demand could approach 52 TWh in the same timeframe. The National Electricity Market encompasses eastern and southern Australia, but does not include Western Australia or the Northern Territory. The latest data highlights how swiftly large computing facilities have become a key factor in new grid demand.
Meanwhile, overall electricity consumption across the market is expected to grow considerably over the next decade. AEMO projects annual usage rising from about 176 TWh in 2025-26 to nearly 250 TWh in 2035-36, reflecting an increase of over 40%. Data centres are just one component of this growth, alongside increased electrification across households, industries, and businesses. The anticipated 34 TWh of data centre demand nearly equals the total electricity now used by households in New South Wales and Victoria combined.
Growing Data Centres Add Strain as Older Power Plants Phase Out
Australia’s electrical system must accommodate this expansion even as scheduled plant closures reduce existing capacity. Over the next ten years, about 15 gigawatts of coal and gas generation will retire. Concurrently, new generation and storage facilities are entering the network, with around 9.1 GW of new capacity connected during 2025-26, marking a record for annual additions. AEMO also lists approximately 40 GW of committed and planned generation and storage projects set for implementation by the early 2030s.
The most recent reliability assessment indicates no expected reliability shortfalls before 2030 under AEMO’s central scenario. The agency attributes this outcome to increased investments in generation, storage, and transmission infrastructure. It also emphasizes the importance of timely project delivery as older power stations are decommissioned. Reliability gaps are used as planning indicators, signaling potential future shortfalls where supply may fall below required standards, rather than predicting actual blackouts. AEMO continues to monitor demand growth alongside shifts in generation mix across the market.
Government Initiatives Target Energy and Grid Cost Management
The federal government has introduced proposed national standards for large data centres, addressing issues such as electricity supply, grid expenses, and water use. The framework would mandate major facilities to support new power generation and contribute to connection costs. Additionally, large operators would be required to reduce power consumption when necessary to maintain grid stability. Measures aimed at improving water efficiency are also included in the proposed standards. Legislation is targeted for early 2027, aligning with the increasing role of data centre electricity demand in national energy planning.
Furthermore, the Australian Energy Market Commission has recommended additional requirements for large data centres connecting to the grid. These proposals advocate for new, clean, and reliable electricity sources, along with enhanced flexibility in power use. The commission’s recommendations also cover market registration, infrastructure costs, and the impact of substantial new loads on existing consumers. These suggestions complement AEMO’s updated demand outlook. Collectively, these official assessments reveal that the pipeline of data centres has more than doubled, while electricity consumption in Australia’s main power market continues to grow.