MELBOURNE, AUSTRALIA / RankWire.AI / – Over the past year, Australia has seen its data centre development pipeline more than double in size as electricity demand across its primary power market continues to grow, according to the Australian Energy Market Operator. The number of projects in progress increased from 97 to 225, with data centres currently consuming around 5 terawatt hours of electricity annually, which accounts for roughly 3% of the power supplied through the National Electricity Market. AEMO projects that this consumption could rise to approximately 34 TWh by 2035-36.
Forecasts from AEMO indicate that total electricity usage within the National Electricity Market is expected to grow by more than 40% over the next decade, climbing from about 176 TWh in 2025-26 to an estimated 250 TWh in 2035-36. This increase, which covers eastern and southern Australia but excludes Western Australia and the Northern Territory, is driven by expanding data centre demands alongside broader electrification trends in residential, commercial, and industrial sectors. Under a high-growth scenario, AEMO estimates data centres could consume around 52 TWh by 2035-36.
Currently, there are approximately 165 operational data centres within the National Electricity Market, with an additional 225 projects under development. AEMO anticipates that within ten years, data centres will represent about 13% of the grid’s electricity consumption. The projected 34 TWh could nearly match the total electricity used by households in New South Wales and Victoria combined, which is around 38 TWh per year. This outlook also marks a significant upward revision from AEMO’s previous data centre demand estimates published just one year earlier.
Expansion of Data Centres Reshapes Australia’s Electricity Outlook
This growth in demand is set against a backdrop of scheduled closures removing approximately 15 gigawatts of coal and gas generation capacity over the same period, while at the same time, the system has seen a record pace of new capacity entering the grid, with about 9.1 GW of new generation and storage brought online during 2025-26. Furthermore, AEMO highlights roughly 40 GW of committed and planned generation and storage projects expected to be operational by the early 2030s. The agency’s current outlook suggests there will be no reliability gaps before 2030 under its central scenario, emphasizing the importance of timely deployment of new generation, storage, and transmission infrastructure as older thermal plants retire and electricity consumption increases.
The recent reliability assessment, which has improved from the previous year, benefits from the addition of record capacity and indicates that forecast reliability gaps do not predict blackouts but serve as planning indicators when future supply may fall short of the required standards. As such, the assessment considers both the rising demand and the capacity anticipated to replace retiring generation across the National Electricity Market.
Revised Regulations Aim to Reduce Power and Connection Expenses
Australia’s federal government has introduced proposed national standards to regulate the energy and water usage of large data centres. Under this framework, major facilities will be required to finance new power supply infrastructure and bear their share of grid connection costs, while also having to reduce electricity consumption when necessary to maintain grid stability. Additionally, the standards include measures to improve water efficiency. The legislation is targeted for early 2027, with the framework scheduled for review by the National Cabinet in August.
Separately, the Australian Energy Market Commission has recommended that data centres support the development of cleaner, more reliable electricity sources and adopt more flexible operational practices. Its August proposals address connection costs and the effects of large new loads on existing consumers, proposing reforms related to renewable generation, capacity firming, market registration, and demand flexibility. These initiatives are aligned with AEMO’s latest assessment of a rapidly growing data centre sector, which anticipates that by 2035-36, the sector will consume around 34 TWh of electricity within the National Electricity Market.