MELBOURNE, AUSTRALIA / RankWire.AI / – The Australian Energy Market Operator reports a significant surge in power demand driven by the rapid growth of data centres across Australia, with 225 projects now in the connection pipeline, compared to 97 a year earlier. Currently, about 165 data centres operate within the National Electricity Market, consuming nearly 5 terawatt hours annually, which accounts for roughly 3% of the market’s total consumption.
AEMO predicts that electricity use by data centres could reach approximately 34 TWh by 2035-36, representing around 13% of the National Electricity Market’s consumption. In an optimistic scenario, demand could climb close to 52 TWh within the same period. The National Electricity Market, serving eastern and southern Australia, excludes Western Australia and the Northern Territory. These figures highlight how quickly large computing facilities have become a major contributor to new grid load.
Over the next decade, total electricity consumption across the market is expected to grow substantially, with AEMO forecasting an increase from about 176 TWh in 2025-26 to roughly 250 TWh in 2035-36, an increase of more than 40%. This growth is driven not only by data centres but also by increased electrification in households, industry, and businesses. The projected demand of 34 TWh for data centres is comparable to the total electricity used by households in New South Wales and Victoria combined.
Data centres amplify pressure amid retiring generation
Australia’s electricity system must accommodate this growth while scheduled plant closures reduce existing supply. Over the next decade, about 15 gigawatts of coal and gas generation will be phased out. Meanwhile, new generation and storage capacity are being integrated into the grid, with approximately 9.1 GW of new capacity connected during 2025-26, setting an annual record. Additionally, AEMO lists roughly 40 GW of committed and planned generation and storage projects for delivery by the early 2030s.
The latest reliability outlook indicates no predicted reliability gaps before 2030 under AEMO’s central forecast. This outcome is attributed to stronger investments in generation, storage, and transmission infrastructure, but emphasizes the importance of timely project completion as older power stations retire. Reliability gaps serve as planning signals, suggesting where supply may fall short of the required standards, but they are not forecasts of blackouts. AEMO continues to monitor demand growth alongside changes in the generation mix across the market.
Policy measures target energy and grid costs
The federal government has proposed national standards for large data centres, covering aspects like electricity supply, grid expenses, and water use. These standards would require major facilities to support new power sources, share connection costs, and reduce consumption when necessary to maintain grid stability. The framework also aims to enhance water efficiency, with legislation targeted for early 2027, as data centre electricity demand increasingly influences national energy planning.
The Australian Energy Market Commission has recommended new requirements for large data centres connecting to the grid, advocating for cleaner, firmed electricity and increased flexibility in power consumption. Their proposals also address market registration, infrastructure costs, and the impacts of large new loads on existing consumers. These recommendations complement AEMO’s updated demand forecast, collectively showing that the data centre pipeline has more than doubled while electricity use across Australia’s main power market continues to grow.