Power is now the main constraint on Australian data centre development. AEMO's 2026 Electricity Statement of Opportunities forecasts that data centre electricity use in the National Electricity Market will grow from about 5 TWh in 2025-26 to about 34 TWh in 2035-36, or from roughly 3% to 13% of grid-supplied electricity. Network businesses reported 225 data centre projects seeking a combined 67 GW of connection capacity, up from 38 GW a year earlier.
In 2026, federal, state and network policy all moved towards one principle: data centres should pay for the grid infrastructure they need and should support new generation rather than drawing on existing supply.
Why Power Is Central to Data Centre Development
A data centre is an electrical facility that also houses computers. Its capacity is described in megawatts because power, not floor space, limits what it can host. Three things follow:
- Site selection follows grid capacity. Industrial land is widely available. A connection of several hundred megawatts on a known date is not. Transgrid says Sydney basin capacity "may soon be fully utilised by new connections".
- Project timing follows connection timing. A building can be finished before its full grid connection is available, so developers phase their capacity to match the connection.
- Operating cost follows energy price. Electricity is the largest operating cost for most data centres, which is why operators sign long-term power purchase agreements.
Grid Connections
Large data centres connect at transmission level (in NSW, usually 132 kV or 330 kV) or at high-voltage distribution level. They normally have an on-site substation.
| State or territory | Transmission | Distribution (main metro) | Market |
|---|---|---|---|
| NSW and ACT | Transgrid | Ausgrid, Endeavour Energy, Essential Energy; Evoenergy (ACT) | NEM |
| Victoria | AusNet (main transmission owner) | CitiPower, Powercor, Jemena, United Energy, AusNet | NEM |
| Queensland | Powerlink | Energex, Ergon Energy | NEM |
| Western Australia (SWIS) | Western Power | Western Power | WEM (separate from the NEM) |
How capacity is allocated in NSW
Since 14 August 2026, Transgrid's Network Capacity Allocation Policy applies to loads of 30 MW or more:
- Capacity is allocated only when a network connection agreement is signed.
- Conditional agreements require evidence of progress on permits, land ownership, construction, equipment procurement and financing.
- Conditional capacity lapses if planning criteria are not met within three months.
Substations & Transmission
Transgrid reports more than 10 GW of data centre connection enquiries within 12 km of its Sydney West substation since late 2024, and more than 20 GW across NSW. w.media reports that about 1.5 GW of Greater Sydney capacity is already in signed connection agreements. A proposed South Creek substation could add about 2 GW more in Western Sydney.
Transgrid has said that new Sydney transmission capacity will be funded by data centres. NSW legislation introduced on 5 August 2026 (the Electricity Infrastructure Investment Amendment Bill 2026) would extend renewable energy zone access scheme powers to large loads of 5 MW or more, so that data centres bear the cost of the network infrastructure their load requires (Energy-Storage.news).
Data Centre Power Demand
How much electricity do Australian data centres use?
About 5 TWh a year in the NEM in 2025-26, roughly 3% of grid-supplied electricity, according to AEMO's 2026 ESOO. AEMO's 2025 ESOO had estimated about 4 TWh (2.2%) for FY2025.
| Measure | Figure | Source |
|---|---|---|
| NEM data centre consumption, 2025-26 | ~5 TWh (~3%) | AEMO 2026 ESOO |
| Forecast, 2035-36 | ~34 TWh (~13%) | AEMO 2026 ESOO |
| NSW share of NEM data centre consumption | 66% | AEMO 2026 ESOO |
| Victoria's share | 30% | AEMO 2026 ESOO |
| Projects in connection processes | 225, 67 GW | AEMO 2026 ESOO (network service provider data) |
| Projects on 2025 list since cancelled | ~36%, including more than 30% of those classed as committed | AEMO 2026 ESOO |
| Data centres' share of NSW peak demand | ~3% now; ~20% by 2035 | Transgrid, via w.media |
The gap between 67 GW of connection requests and a forecast of 34 TWh of annual use (about 3.9 GW average load) shows how speculative much of the pipeline is. Many projects lodge enquiries in more than one location, and many will not proceed.
Renewable Energy
Operators are contracting renewable generation to cover their consumption and to meet customer and government expectations:
- Amazon signed nine PPAs in April 2026 totalling 430 MW in NSW and Victoria. Eight include co-located batteries, and they are its first solar-plus-storage PPAs outside the US (Energy-Storage.news).
- Firmus says Project Southgate aims to support up to 5.1 GW of new renewable generation (Firmus).
- Project Meridien (Kimberley) proposes its own wind, solar, battery and gas supply.
The federal Expectations of data centres and AI infrastructure developers (23 March 2026) ask operators to support the energy transition without increasing prices for other users. They are not legally binding.
Power Purchase Agreements
A PPA is a long-term contract to buy electricity, or the renewable attributes of electricity, from a generator. Data centre PPAs in Australia are usually:
- Physical or retail-backed. Energy flows via a retailer to the site.
- Virtual (financial). A contract for difference against the spot price, with renewable certificates transferred.
The Australian Energy Market Commission's August 2026 recommendations would use the REGO renewable certificate scheme and require firming contracts for large data centres (see Power Constraints, below). Once adopted, those rules would affect how PPAs are structured and accounted for.
More: Data centre energy suppliers
Backup Power
Every large data centre has backup power to keep running through grid outages:
- UPS systems bridge the seconds between an outage and generator start.
- Diesel generators carry the load for longer outages. Fleets are large: NEXTDC S7 proposes 340 generators, and the Mamre Road campus between 842 and 852.
- Fuel storage is sized for a set runtime, often with refuelling contracts.
Generators are the most contested element in planning, because of testing emissions and noise. Alternative fuels (such as renewable diesel) and batteries are being looked at to reduce generator runtime.
More: Generators · UPS
BESS
Battery energy storage systems (BESS) are taking on several roles at data centres:
- Load smoothing between the data centre and the grid
- Speed to power: storage can reduce the firm grid capacity a site needs, which can help with connection timing
- Backup alongside, or partly replacing, diesel generators
- Firming renewable PPAs, as in eight of Amazon's nine April 2026 PPAs
Quinbrook's Supernode in northern Brisbane shows the model at grid scale. Stage 1 (260 MW / 619 MWh) began commercial operation in February 2026, on a site originally announced as a data centre campus.
More: Data centre battery storage
Power Constraints
2026 policy changes affecting data centre power:
| Date | Body | Change |
|---|---|---|
| 23 Mar 2026 | Australian Government | Expectations of data centres and AI infrastructure developers (non-binding) |
| 28 Jul 2026 (published 5 Aug) | AEMC | Four recommendations to energy ministers: renewable certificates via REGO, firming capacity contracts, market registration for large data centres, support for co-located generation and storage |
| 5 Aug 2026 | NSW Government | Electricity Infrastructure Investment Amendment Bill 2026 introduced |
| 14 Aug 2026 | Transgrid | Network Capacity Allocation Policy takes effect |
| 17 Aug 2026 | NSW Government | NSW Data Centre Policy Framework: no net cost to consumers; data centres fund additional energy and water supply |
| Aug 2026 | National Cabinet | Considered a national framework; federal legislation expected early 2027 |
| 22 Sep 2026 | Victorian Government | Sustainable Data Centre Action Plan: new data centres to bring their own renewable supply and storage (Premier of Victoria) |
Sources: Energy-Storage.news, NSW Government.
Major Australian Projects
| Project | Power-related details (public) |
|---|---|
| NEXTDC S7 | On-site substation; 340 backup diesel generators |
| Mamre Road campus | 1 to 1.2 GW; 842 to 852 generators; 14,430 kL of diesel storage in the original application |
| Western Downs Digital Park | 2.16 GW peak; direct connection to a major substation, bypassing the Ergon distribution network |
| Goodman SYD01 | 90 MW of secured utility power for 61 MW IT |
| Project Meridien | Off-grid: wind, solar, batteries and gas |
Power Infrastructure Suppliers
Electrical contractors · Generators · UPS · BESS · Energy · Engineering
Frequently Asked Questions
How much power does a data centre use in Australia?
Individual facilities range from a few MW (edge and enterprise sites) to hundreds of MW (hyperscale campuses). The largest current proposals are measured in gigawatts: Western Downs Digital Park at 2.16 GW peak and the Mamre Road campus at 1 to 1.2 GW.
Will data centres increase electricity prices?
Governments are writing rules to prevent it. Transgrid, the NSW framework and the AEMC recommendations all aim to make data centres pay for the network upgrades and new supply they need. Whether that works will depend on implementation.
Where can new data centres get grid power?
Sydney basin transmission capacity is largely committed. Transgrid has pointed to regional NSW areas such as the Hunter and Riverina as possible alternatives, and current proposals also target regional Queensland, Tasmania and the Kimberley. Each option trades grid availability against distance, workforce and connectivity.
Supplying Data Centre Power Infrastructure?
Power is now the first decision on every data centre project, so electrical, energy and storage suppliers are engaged earlier than ever. AISB helps power infrastructure suppliers reach developers while projects are still being scoped.
Sources & Verification
- AEMO 2026 ESOO, 25 Aug 2026, via w.media. Link
- Transgrid: Data centres and electricity capacity in NSW. Link
- w.media: Transgrid Sydney capacity. Link
- Energy-Storage.news: Policy on three fronts. Link. Amazon PPAs. Link
- NSW Government: Data Centre Policy Framework. Link
- Quinbrook: Supernode Stage 1. Link
See something that needs updating? Submit a correction.
