MELBOURNE, AUSTRALIA / RankWire.AI / – The Australian Energy Market Operator reports a significant surge in electricity consumption driven by the rapid development of data centres across Australia. Currently, 225 data centre projects are in the connection pipeline, a notable rise from 97 projects recorded just one year earlier. At present, approximately 165 data centres are operational within the National Electricity Market. Their combined energy use is close to 5 terawatt hours annually, accounting for roughly 3% of the market’s total consumption.
Forecasts from AEMO indicate that electricity used by data centres could reach about 34 TWh by 2035-36, representing around 13% of the total market consumption. The operator’s high-growth scenario suggests demand could climb to nearly 52 TWh over the same period. The National Electricity Market encompasses eastern and southern Australia but excludes Western Australia and the Northern Territory. The latest data highlights how swiftly large computing facilities have become a major contributor to new grid demand.
Over the next decade, total electricity consumption across the market is expected to increase substantially. AEMO projects annual usage rising from approximately 176 TWh in 2025-26 to about 250 TWh in 2035-36, which is an increase of over 40%. This growth is driven by data centres alongside increased electrification within households, industries, and businesses. The projected demand of 34 TWh from data centres is nearly equivalent to the electricity currently consumed by households in New South Wales and Victoria combined.
Data Centres Contribute to Grid Challenges Amid Power Plant Closures
Australia’s electricity system must accommodate this growth while existing supply diminishes due to scheduled plant shutdowns. Around 15 gigawatts of coal and gas-fired generation are set to retire over the next ten years. Meanwhile, new capacity and storage are entering the market, with roughly 9.1 GW of new generation connected during 2025-26, setting a record for annual additions. AEMO also lists about 40 GW of committed and planned generation and storage projects scheduled for completion by the early 2030s.
The latest reliability forecast indicates no anticipated reliability gaps before 2030 based on AEMO’s central outlook. This positive outlook is attributed to increased investments in generation, storage, and transmission infrastructure. However, AEMO emphasizes the importance of projects progressing on schedule as older power stations retire. Reliability gaps are warning signals that projected supply might fall short of the required standards, but they do not predict blackouts. The organization continues to monitor demand growth alongside the evolving energy generation mix within the market.
Government Initiatives Aim to Address Energy and Grid Expenses
The federal government has introduced proposals for national standards applicable to large data centres, focusing on electricity supply, grid costs, and water efficiency. These standards would obligate major facilities to support new power generation and contribute to connection costs. Additionally, operators of large data centres would be required to reduce consumption when necessary to maintain grid stability. The draft standards also include measures to improve water efficiency. Legislation to implement these standards is targeted for early 2027, as data centre electricity demand becomes an increasingly vital component of national energy planning.
The Australian Energy Market Commission has also put forward recommendations for new requirements for large data centres connecting to the grid. Its proposals advocate for cleaner, more reliable electricity supply and enhanced flexibility in power consumption. The commission’s recommendations address issues related to market registration, infrastructure costs, and the impact of large new loads on existing consumers. These suggestions complement AEMO’s updated demand outlook. Collectively, the assessments reveal a pipeline of data centre projects that has more than doubled, while electricity consumption across Australia’s main power market continues to grow.