MELBOURNE, AUSTRALIA / RankWire.AI / – The Australian Energy Market Operator (AEMO) reports that the country’s pipeline of data centre projects has more than doubled over the past year amid rising electricity demand in its main power market. The number of ongoing and planned data centres has grown from 97 to 225, with these facilities currently consuming approximately 5 terawatt hours (TWh) annually. This accounts for around 3% of the electricity supplied through the National Electricity Market. AEMO projects that this figure could increase to about 34 TWh by 2035-36.
Looking ahead, AEMO predicts that overall electricity use across the National Electricity Market will rise by more than 40% over the next decade. The total consumption is expected to jump from roughly 176 TWh in 2025-26 to nearly 250 TWh in 2035-36. This market primarily serves eastern and southern Australia, excluding Western Australia and the Northern Territory. The rising demand from data centres is part of a broader trend of electrification affecting residential, commercial, and industrial sectors. In a high-growth scenario, AEMO estimates data centre energy use could reach about 52 TWh by 2035-36.
Currently, the National Electricity Market hosts around 165 operational data centres, in addition to the 225 projects under development. AEMO anticipates that within ten years, data centres will account for approximately 13% of the grid’s electricity consumption. The expected 34 TWh of data centre energy use would be close to the total electricity consumed by all households in New South Wales and Victoria combined, which amounts to about 38 TWh annually. This forecast represents a significant upward revision from AEMO’s data centre demand outlook published a year earlier.
Data centre expansion influences future electricity projections
This surge in demand coincides with scheduled closures that will eliminate roughly 15 gigawatts of coal and gas generation capacity over the next decade. Meanwhile, a record pace of new capacity has been added to the grid, with about 9.1 GW of new generation and storage coming online during 2025-26. Additionally, AEMO identifies roughly 40 GW of committed and planned generation and storage projects expected to be operational by the early 2030s. Currently, the operator sees no reliability gaps forecasted before 2030 under its central scenario.
AEMO emphasizes the importance of timely deployment of new generation, storage, and transmission infrastructure as older thermal plants retire and electricity consumption increases. The latest reliability assessment has improved compared to the previous year, thanks to the record addition of new capacity. It is important to note that forecasted reliability gaps are not predictions of blackouts but signals for planning when projected supply might fall short of the required reliability standards. The assessment considers both the rising demand and the capacity expected to replace retiring generation across the National Electricity Market.
New regulations aim to reduce power and connection expenses
Australia’s federal government has proposed a set of national standards addressing the energy and water demands of large data centres. The proposed framework would require major facilities to finance new power supply projects and cover their fair share of grid connection costs. Large operators would also be mandated to reduce electricity consumption when necessary to maintain grid stability. The standards include provisions to enhance water efficiency. Legislation is targeted for early 2027, with the framework scheduled for review by National Cabinet in August.
The Australian Energy Market Commission has separately recommended that data centres support the development of new clean, reliable electricity sources and operate more flexibly. Its August recommendations also focus on connection costs and the impact of large new loads on existing electricity consumers. The commission suggested measures relating to renewable energy, firming capacity, market registration, and flexible demand. These reforms complement AEMO’s latest outlook on the rapidly growing data centre sector. By 2035-36, AEMO expects data centres to use about 34 TWh of electricity across the National Electricity Market.