Australia's AI data centres: AEMO's demand forecast and the grid rules

Australia's grid operator expects data centres on the main eastern grid to grow from about 5 terawatt hours of electricity in FY26 to about 34 terawatt hours by FY36, or 13 percent of grid use. Governments are now deciding who funds the new power. Most of those rules are still being written.

Australia is a different case from the big Asian hubs. It is not short of land, and it has a deep pipeline of projects. What it has is a grid that was not built for loads of several hundred megawatts, a politically sensitive power bill, and a federal government that has chosen to attach conditions to growth rather than simply welcome it. What follows covers the numbers from the market operator, the policy steps taken in 2026, one flagship project, and the questions that remain open.

A few terms first. A terawatt hour (TWh) is a billion kilowatt hours, a measure of energy used over a year. A gigawatt (GW) is a measure of power at a moment in time; one GW running all year uses about 8.76 TWh. The National Electricity Market (NEM) is the interconnected grid covering the eastern and south eastern states. Western Australia is not part of it. AEMO is the Australian Energy Market Operator, which runs the NEM and publishes planning forecasts. The ESOO is its annual Electricity Statement of Opportunities, a ten year reliability outlook. The ISP is its Integrated System Plan, a longer roadmap out to 2050.

Key numbers at a glance

• Data centres on the NEM, FY26: about 165 facilities using roughly 5 TWh, about 3 percent of NEM operational consumption (AEMO, 2026 ESOO data centre explainer, August 2026).
• Average monthly data centre demand on the NEM: from nearly 200 MW in January 2018 to more than 700 MW by June 2026 (AEMO, same explainer).
• Share of FY26 data centre demand by state: New South Wales 66 percent, Victoria 30 percent, South Australia 2 percent, Queensland 1 percent, Tasmania under 1 percent (AEMO, same explainer).
• Central forecast (Step Change scenario): about 15 TWh by FY30, or 7.8 percent of operational consumption, and about 34 TWh by FY36, or 13 percent (AEMO, 2026 ESOO).
• High growth sensitivity: about 52 TWh by FY36, reported as 18 TWh above Step Change (AEMO, via W.Media report of the ESOO, 25 August 2026).
• Projects in the connection pipeline: 225 projects with 67 GW of proposed capacity, against 38 GW in the 2025 assessment (AEMO explainer and the W.Media report).
• Cancellation rate: 36 percent of projects listed in the 2025 ESOO were cancelled (AEMO explainer).
• Average grid connection utilisation: about 27 percent in FY26 (AEMO explainer). The W.Media report says AEMO expects mature facilities to reach 45 to 51 percent.
• Long range view: about 34 TWh a year by 2050, almost 10 percent of underlying NEM demand (AEMO 2026 ISP, released 25 June 2026, as reported by W.Media).
• NSW bill threshold: large loads of 5 MW or more (NSW bill introduced 5 August 2026, as reported by PV Tech).
• Federal estimate of the data centre investment pipeline: A$150 billion (reported by PV Tech, as of August 2026; a government valuation, not an audited number).

What AEMO actually forecasts

AEMO treats data centres separately from ordinary businesses and from heavy industry such as mining. Its stated reason is that they grow fast and nobody knows how much digital demand there will be in ten years. Its method combines two things: project information from developers and the network companies that connect them, and a broader economic outlook covering digital services and AI adoption.

Under the central scenario, the one AEMO regards as most likely, data centre consumption triples to about 15 TWh by FY30 and grows almost seven times to about 34 TWh by FY36, then growth tapers off. That would make data centres the third largest user group on the grid by FY36 at 13 percent. AEMO puts businesses at 39 percent, large industrial facilities at 21 percent, business electrification at 9 percent and electric vehicles at 7 percent. In AEMO's own words, data centres will be a larger consumer but are not expected to become the largest.

The 2026 ISP, released in June, takes the view out to 2050. It reports data centres reaching about 34 TWh by 2050 in its central scenario, close to 10 percent of underlying demand. Notice what this means. The ESOO sees about 34 TWh around FY36, and the ISP sees about 34 TWh in 2050. The two documents use different scenario settings and different totals for the whole grid, so the share differs (13 percent against almost 10 percent), but the headline energy figure is similar. The ISP also says data centre development has been exceeding what earlier ISPs forecast, and flags considerable uncertainty about the future.

There is also a high growth sensitivity. If data centres reached about 52 TWh by FY36, AEMO says New South Wales, Victoria and South Australia would need extra generation, storage and transmission from 2032 to 2033 onward. Reliability results in that case worsen. For example, the reported expected unserved energy in FY36 in New South Wales rises to 5.58 percent in the high growth case against 2.24 percent under AEMO's Government Schemes and Actionable Developments case. That figure comes from a secondary report of the ESOO, so check it against AEMO's full document before quoting it.

The pipeline is not the forecast

The most quoted number in Australian coverage is 67 GW. It is the combined capacity that developers and network companies say they have asked to connect, across 225 projects. For scale, the whole NEM's operational demand is far smaller than that. AEMO is explicit that this is not a forecast of future demand.

Several things shrink the pipeline in practice, all drawn from AEMO's explainer and the W.Media report:

• Cancellation. About 36 percent of projects on the 2025 list were cancelled, including more than 30 percent of those classed as committed, according to the W.Media report of AEMO's findings.
• Slow ramp up. Operators typically indicate five to 10 years to fill a campus. AEMO lists load maturity of 5 to 10 years.
• Low utilisation. Existing connections ran at about 27 percent of their connected capacity on average in FY26. A data centre asks for a large connection but uses only a portion of it for a long time.

AEMO applies probability weightings based on project status, connection stage and developer size. That is how 67 GW becomes a forecast of about 34 TWh. If a facility ran flat out all year at 1 GW, it would use 8.76 TWh. Thirty four TWh is therefore the equivalent of about four such gigawatts running constantly, a tiny fraction of the pipeline.

Where the load is

New South Wales and Victoria account for 96 percent of current data centre demand. That is Sydney and Melbourne, close to the subsea cables, financial customers and the cloud regions of the large providers. AEMO says the most advanced projects sit in those two states, while South Australia and Tasmania are generally less mature. The 2026 ISP's higher demand sensitivity highlights South Australia, Melbourne to Geelong, Sydney to Newcastle to Wollongong, and Gladstone as places where extra load could land.

AEMO also notes that its forecast does not account for all data centres proposed in Queensland. That matters because Queensland took a different line in the national policy talks, described below.

Policy in 2026: from welcome to conditions

Australia's federal approach moved through several steps this year. The dates below come from the sources named.

• December 2025: the National AI Plan was released. A law firm commentary describes the next step as expectations for data centres.
• 23 to 24 March 2026: the government published Expectations of data centres and AI infrastructure developers. It applies to new or expanded co-location, hyperscale and large AI compute facilities, and excludes small edge and enterprise facilities. It is policy, not legislation.
• 8 May 2026: a request went to the market rule maker, the Australian Energy Market Commission (AEMC), to develop options for a data centre energy obligation.
• 15 July 2026: the Prime Minister announced that large data centres would be legally required to become net generators of renewable energy (reported by PV Tech). A later law firm account says the Commonwealth moved away from a renewables only position to suit Queensland and the Northern Territory.
• 28 July 2026: the AEMC gave advice to the Energy and Climate Change Ministerial Council. The public release followed on 5 August.
• 5 August 2026: New South Wales introduced a bill giving its energy minister powers to control grid access for large loads of 5 MW or more.
• 26 August 2026: National Cabinet affirmed a plan for national standards on large data centres, with legislation targeted for early 2027.

The five expectations in the March document are: act in the national interest, support the energy transition, use water sustainably, invest in skills and jobs, and strengthen research and local capability, including favourable compute access for start ups and researchers. On energy, the document asks operators not to raise energy prices, to work with regulators and suppliers to secure additional clean energy, to cover a share of transmission and infrastructure costs, to adopt efficiency measures, and to support the grid through demand flexibility. The government says it will prioritise proposals that align with the expectations when they pass through federal processes.

What the AEMC advised

The AEMC's advice, as summarised by PV Tech and W.Media, has four main parts. Only secondary summaries of the advice were available at the time of writing, so check the details against the AEMC's own release.

• Certificates. Data centres would offset their consumption with certificates tied to new renewable generation, closing the gap that lets existing plants count.
• Firming. They would also contract for firming capacity, meaning supply that can be called on when wind and sun are low.
• Registration. They would register as NEM market participants, which gives AEMO better visibility of large loads, especially those with power electronics that can trip together in a grid fault.
• Flexibility. Connection agreements would support demand flexibility and co-located generation and storage.

The AEMC calls its recommendations preliminary. The timelines reported: roughly 12 months to implement the certificate obligation, and 24 to 36 months after ministerial endorsement for registration and connection reforms. Separately, the AEMC proposed in March 2026 that facilities of 30 MW or more should stay connected during grid faults.

National Cabinet and the state split

On the National Cabinet outcome, the source is a law firm article published on 27 August 2026, not the communique itself. It says the leaders affirmed mandatory standards for large data centres across three areas: energy, water and land use. Under energy, operators would underwrite new supply, pay their full connection costs, meet efficiency measures and support grid stability. Under water, they would minimise use and pay for extra water infrastructure. Land use is described as the least developed area. The standards would sit on top of state planning approvals rather than replace them.

States differ. New South Wales plans to make compliance a precondition for transmission connection, and has asked its pricing regulator to review data centre water pricing. Queensland and the Northern Territory asked for an approach that does not favour one energy source, since they own state generation. Some coverage described the outcome as binding rules already in force. The law firm account makes clear that coverage thresholds and the detail of the standards are still to be settled through consultation, so that reading overstates the position.

One flagship project: NEXTDC at Eastern Creek

The best known project is NEXTDC's S7 campus at Eastern Creek in western Sydney. On 5 December 2025 NEXTDC announced a non-binding memorandum of understanding with OpenAI to plan, develop and operate a large AI campus under the OpenAI for Australia program. The announced capacity was 550 MW. First stage availability was expected in the second half of calendar 2027, subject to approvals. NEXTDC bought the land in 2024 for about A$353 million, according to the report.

The planning file gives a larger number. The New South Wales Major Projects portal lists the NEXTDC S7 Data Centre at Eastern Creek as State Significant Development SSD-113934740, describing an operational capacity of 612 MW in three two storey data storage buildings with 340 back up diesel generators, fuel storage and an on site substation. As of 19 October 2026 the portal shows the application at the Prepare EIS stage, meaning the environmental impact statement has not yet been exhibited or approved. So 550 MW is the figure in the company's OpenAI announcement and 612 MW is the figure in the planning application. Neither is a built or approved capacity, and an MOU is not a construction contract or a binding commitment to take the capacity.

What is firm and what is uncertain

Firm, because an official body states it:

• About 165 data centres used roughly 5 TWh in FY26 and demand has risen from nearly 200 MW to above 700 MW since 2018.
• The state split, the pipeline of 225 projects and 67 GW, and the 36 percent cancellation figure.
• The March 2026 expectations exist and are policy, not law.
• New South Wales introduced its bill on 5 August 2026.

Uncertain:

• Whether the central forecast is right. AEMO flags uncertainty itself, and its high sensitivity is 56 percent higher.
• How many of the 67 GW will be built, and when.
• Whether the national standards will reach legislation in early 2027, which thresholds will count as large, and how states with different energy mixes will apply them.
• What the certificate and firming rules will cost operators and how fast they start.
• The size and timing of individual campuses, as the gap between the announced 550 MW and the 612 MW planning figure for Eastern Creek shows.

Several sources used here are secondary reports, including the accounts of the AEMC advice and the federal expectations document. Where a figure comes only from a report, the text says so.

What to watch next

• Ministerial decisions on the AEMC advice and the rule change requests on cost allocation for new large loads. The ministerial council was reported to consider rule change requests in September 2026.
• A final decision on technical standards for large loads, reported as due in late October 2026.
• Draft national legislation, targeted by end of 2026, with passage in early 2027.
• The NSW bill and any access scheme declared under it.
• AEMO's next data centre update and the 2027 ISP cycle, to see whether the pipeline shrinks or the forecast moves.
• Whether Queensland's separate approach leads to a different mix of sites.

For related context, see the regional overview of Asia Pacific AI infrastructure, and the explainers on OpenAI compute commitments and Stargate and Anthropic compute commitments.

For teams running software on this capacity, Safeguard offers SBOM and dependency scanning, with a free scan at https://gold.safeguard.sh/scan.

Quick check

Sources

• AEMO, 2026 ESOO data centre forecasting overview (PDF)
• W.Media, AEMO: Australia's data centres to use 34TWh by 2035-36
• W.Media, AEMO: Data centres could account for almost 10% of NEM electricity demand by 2050
• Clayton Utz, Great expectations: what the Australian Government requires of data centres and AI infrastructure (24 March 2026)
• Clayton Utz, Nine governments, one rulebook: National Cabinet backs mandatory AI and data centre standards (27 August 2026)
• PV Tech, Australia's data centre energy rules take shape as AEMC publishes framework and NSW moves to control grid access
• TechInformed, NEXTDC partners with OpenAI on Sydney AI campus (5 December 2025)
• NSW Planning Portal, NEXTDC S7 Data Centre Eastern Creek, SSD-113934740 (status as of 19 October 2026)

Last reviewed: 19 October 2026.