MELBOURNE, AUSTRALIA / RankWire.AI / – The dominant electricity market in Australia is set for a significant rise in demand, primarily driven by the rapid growth of data centres. According to the Australian Energy Market Operator, there are now 225 data centre projects in the connection pipeline, a notable increase from 97 projects recorded just a year earlier. Currently, around 165 data centres are operational across the National Electricity Market. Their combined electricity consumption is close to 5 terawatt hours annually, representing roughly 3% of total market usage.
AEMO forecasts that energy consumption by data centres will rise to approximately 34 TWh by 2035-36, potentially increasing the sector’s share of the National Electricity Market’s total to about 13%. The agency’s high-growth scenario estimates demand could reach nearly 52 TWh during the same period. The National Electricity Market, which includes eastern and southern Australia, excludes Western Australia and the Northern Territory. These figures illustrate how swiftly large computing facilities have become a key contributor to new grid load.
Overall electricity usage across the market is also expected to grow substantially over the next decade. AEMO projects annual consumption will increase from roughly 176 TWh in 2025-26 to about 250 TWh in 2035-36, reflecting growth of more than 40%. This increase is driven not only by data centres but also by wider electrification efforts across households, industries, and businesses. The projected 34 TWh demand from data centres is approaching the total electricity currently used by households across New South Wales and Victoria combined.
Data centres exert additional strain amid the retirement of older power plants
Australia’s electricity system must accommodate this growth while scheduled plant closures decrease existing supply. Over the next ten years, about 15 gigawatts of coal and gas generation are expected to retire. Meanwhile, new generation and storage infrastructure are coming online. During 2025-26, roughly 9.1 GW of new capacity was connected, setting a record for annual additions. Additionally, AEMO has listed approximately 40 GW of committed and anticipated generation and storage projects set for delivery by the early 2030s.
The latest reliability assessment indicates there are no expected reliability gaps before 2030 under AEMO’s central forecast. The agency attributes this to increased investments in generation, storage, and transmission. It emphasizes, however, that timely project completion is critical as older power stations retire. Reliability gaps are not forecasts of blackouts but serve as planning signals when projected supply may fall short of demand. AEMO continues to monitor demand growth alongside changes in generation sources across the market.
Government initiatives aim to address energy and grid infrastructure costs
The federal government has proposed national standards for large data centres, which would encompass electricity supply, grid costs, and water usage. These standards would obligate major facilities to support new power generation and cover their share of connection expenses. They also include provisions requiring large operators to reduce consumption when necessary to maintain grid stability. The framework aims to incorporate water efficiency measures as well. Legislation related to these standards is targeted for early 2027, as data centre electricity demand increasingly influences national energy strategies.
The Australian Energy Market Commission has put forward additional recommendations for large data centres connecting to the grid. These include the need for cleaner, more reliable electricity sources and increased flexibility in power consumption. The proposals also address market registration, infrastructure costs, and the impacts of large new loads on existing consumers. These recommendations complement AEMO’s updated demand outlook. Collectively, these official assessments reveal a pipeline of data centre developments that has more than doubled while electricity consumption in Australia’s main power market continues to grow.