MELBOURNE, AUSTRALIA / RankWire.AI / – The primary electricity market in Australia is expected to experience a significant boost in energy demand as the development of data centres accelerates. The Australian Energy Market Operator reports that there are now 225 data centre projects in the connection pipeline, compared to 97 projects just a year earlier. Currently, about 165 data centres are operational across the National Electricity Market. Their electricity consumption is close to 5 terawatt hours annually, accounting for roughly 3% of the market’s total consumption.
AEMO projects that energy use by data centres will rise to approximately 34 TWh by 2035-36. This increase would raise the sector’s portion of National Electricity Market consumption to around 13%. In its high-growth scenario, the operator estimates demand could reach nearly 52 TWh over the same period. The National Electricity Market covers eastern and southern Australia, but it does not include Western Australia or the Northern Territory. These figures highlight how rapidly large computing facilities have become a significant contributor to new grid demand.
Over the next decade, total electricity consumption across the market is also expected to grow substantially. AEMO forecasts annual usage will increase from about 176 TWh in 2025-26 to roughly 250 TWh in 2035-36, marking more than a 40% growth. This rise is driven by data centres alongside increased electrification in households, industry, and businesses. The projected 34 TWh of data centre demand currently rivals the combined electricity consumption of households across New South Wales and Victoria.
Data Centres Exert Additional Strain as Older Power Plants Shut Down
Australia’s electricity system must accommodate this growth while existing power sources are phased out. Approximately 15 gigawatts of coal and gas generation capacity will retire over the next decade. Meanwhile, new generation and storage facilities are coming online. During 2025-26, about 9.1 GW of new capacity was connected, setting a record for annual additions. Additionally, AEMO lists roughly 40 GW of committed and anticipated projects for generation and storage, expected to be completed by the early 2030s.
The most recent reliability assessment indicates there are no predicted reliability shortfalls before 2030 under AEMO’s central scenario. The agency attributes this to increased investments in generation, storage, and transmission infrastructure. It emphasizes the importance of timely project completion as older power stations retire. While reliability gaps signal potential shortfalls when projected supply drops below needed levels, they do not predict actual blackouts. AEMO continues to monitor demand growth alongside shifts in the generation mix within the market.
The Federal Government’s Framework Aims to Mitigate Energy and Grid Costs
The Australian federal government has introduced proposed national standards for large data centres concerning electricity supply, grid expenses, and water consumption. The new framework would mandate major facilities to support additional power generation and share connection costs. It also requires large operators to reduce energy use when necessary to ensure grid stability. Measures aimed at enhancing water efficiency are included in the proposed standards. The government has targeted legislation implementation by early 2027, as data centre electricity demand increasingly influences national energy planning.
The Australian Energy Market Commission has also put forward new requirements for large data centres connecting to the grid. Their proposals include sourcing cleaner, firmed electricity supplies and increasing flexibility in power consumption. The commission’s recommendations also cover market registration, infrastructure costs, and the impacts of large new loads on existing consumers. These suggestions complement AEMO’s updated demand forecast. Together, these official assessments reveal a pipeline of data centres that has more than doubled, while electricity consumption across Australia’s main power market continues to rise.