By 2036, Australian data centres are projected to consume seven times more energy.

      Australian data centres are expected to account for 13% of the country’s primary electricity market by 2035-36, a significant increase from the current 3%. This represents an almost sevenfold growth over the next decade, as reported by Keira Wright for Bloomberg, based on data from the Australian Energy Market Operator (AEMO).

      This projection is included in AEMO’s annual Electricity Statement of Opportunities, which assesses whether electrical supply will meet demand in the National Electricity Market over the next ten years—a key document for utilities and governing bodies.

      According to AEMO's forecasts, data centres are anticipated to consume 34 terawatt hours annually from the National Electricity Market by 2035-36. This forecast comes at a time when Australia is phasing out many of its old baseload power sources, with approximately 13 gigawatts of coal-fired capacity expected to retire within the decade, alongside nearly 2 gigawatts of gas generation.

      These figures represent different metrics; the data centre forecast measures energy consumption over a year in terawatt hours, while retirements reflect capacity at a specific moment in gigawatts.

      The AEMO report emphasizes that data centres have a considerable impact on the grid because they operate consistently throughout the day and year, akin to large industrial demands. However, this consistent usage is a concern for grid management, as it places additional stress during off-peak hours when other operations diminish. Most significant energy demands follow predictable patterns, while data centres do not adhere to such trends.

      Despite the challenges, there are developments that alleviate some pressure. Last year saw a record increase in generation and storage connections, greatly enhancing reliability. AEMO noted that 2025-26 will see about 9 gigawatts of new generation and storage reach full output, double that of the previous year. AEMO's CEO, Daniel Westerman, stated that substantial new capacity is expected before the early 2030s, which will help replace retiring generation and accommodate growing electricity demand. He also emphasized the necessity of subsequent investment post-2030 to maintain reliability.

      However, more than a third of the data centre projects that AEMO identified last year have been canceled, necessitating a reevaluation of capacity forecasts in this sector. This fluctuation presents both risks and opportunities, as the pipeline could either shrink again or replenish more swiftly than infrastructure is developed.

      The Commonwealth Bank of Australia predicts that the expansion of data centres could reach A$150 billion (approximately $108 billion) by 2030. Australia seeks to attract this investment while also managing the strain on its electricity grid and water resources, as reported by Bloomberg.

      Data centres often begin operations before the requisite infrastructure is established. The Clean Energy Finance Corporation has indicated that this can lead to bottlenecks, increased consumer costs, and greater reliance on fossil fuels than originally intended.

      On the political front, the federal government is advocating for new data centres to operate on renewable energy. This initiative has been met with resistance from some regional administrations. Prime Minister Anthony Albanese is set to address premiers about a new AI law, ensuring that federal approval processes align with state regulations rather than overriding them. The conservative governments of Queensland and the Northern Territory have been the strongest opponents, with climate experts stressing the importance of setting appropriate regulations.

      Some developers are opting to bypass grid connections altogether. A proposed off-grid AI data centre in a gas-rich region could operate independently by generating its own power, effectively removing the site from the grid's oversight, though it does not address emissions concerns.

      This pattern is mirrored in other regions, where operators or governments confront lengthy connection queues, prompting calls for pauses or audits. For instance, Texas halted new connections while conducting an audit, and Scotland considered a moratorium on new data centres, impacting the UK's AI development plans. In Europe, the predominant challenge is queuing rather than political disputes, resulting in a significant portion of new capacity being delayed.

      AEMO's report presents a demand projection rather than a construction timeline. The 34 terawatt hour estimate relies on a capacity pipeline that has already seen a third of its projects withdrawn. The report does not clarify which sites will be developed, the sources of their power, or the consequences for the projected 13% market share if the anticipated investment does not materialize. Additionally, it does not resolve the discussions among premiers regarding who holds the authority to approve new data centres.