MELBOURNE, AUSTRALIA / RankWire.AI / – The development pipeline for data centers across Australia has more than doubled within a year, driven by increasing electricity demand in its primary power market. According to the Australian Energy Market Operator, the number of projects has grown from 97 to 225. Currently, data centers consume roughly 5 terawatt hours of electricity annually, accounting for about 3% of power supplied via the National Electricity Market. AEMO projects this figure to reach approximately 34 TWh by 2035-36.
AEMO predicts that total electricity consumption in the National Electricity Market will increase by over 40% over the next decade, rising from about 176 TWh in 2025-26 to nearly 250 TWh in 2035-36. This growth, which excludes Western Australia and the Northern Territory, is driven not only by expanding data center needs but also by broader electrification across residential, commercial, and industrial sectors. Under a high-growth scenario, AEMO anticipates data center energy use to hit about 52 TWh by 2035-36.
Currently, the National Electricity Market hosts around 165 active data centers, with an additional 225 projects in progress. AEMO estimates that within ten years, data centers could represent approximately 13% of the market’s total electricity consumption. The projected 34 TWh demand would be nearly equivalent to the combined annual electricity use of all households in New South Wales and Victoria, which is about 38 TWh. This outlook marks a significant rise from AEMO’s previous forecasts published just one year earlier.
Data center expansion reshaping Australia’s electricity forecast
This surge in demand coincides with the scheduled shutdown of roughly 15 gigawatts of coal and gas generation capacity over the decade. Meanwhile, new capacity additions have reached a record pace, with approximately 9.1 GW of new generation and storage connected to the grid during 2025-26. Additionally, AEMO identifies around 40 GW of committed and planned projects to be delivered by the early 2030s. Its current outlook indicates no reliability shortfalls before 2030 under its central scenario.
AEMO emphasizes that timely deployment of new generation, storage, and transmission infrastructure is critical as aging thermal plants are retired and electricity consumption continues to grow. The latest reliability assessment shows improvement from the previous year, reflecting the record capacity additions. Importantly, forecast reliability gaps do not predict blackouts but serve as strategic indicators when projected supply may not meet reliability standards. The assessment considers both the rising demand and the capacity expected to replace retiring generators across the market.
New regulations aim to curb power and connection costs
Australia’s federal government has introduced proposed national standards to regulate the energy and water consumption of large data centers. The framework mandates that major facilities finance new power supplies and contribute their fair share towards grid connection expenses. Large operators will also be required to reduce electricity use when necessary to maintain grid stability. The standards include provisions to enhance water efficiency. Legislation implementing these measures is targeted for early 2027, with the framework scheduled for review by National Cabinet in August.
Separately, the Australian Energy Market Commission has recommended that data centers support the development of new, clean, and firmed electricity sources and operate with greater flexibility. Its August proposals address connection costs and the impact of large new loads on existing consumers. These reforms include measures related to renewable generation, firming capacity, market registration, and demand flexibility. These initiatives complement AEMO’s latest assessment of a rapidly expanding data center sector, which projects that by 2035-36, data centers will use about 34 TWh of electricity across the National Electricity Market.