The number of data centres under development across Australia has doubled in a single year, while national electricity consumption is forecast to surge by more than 40 per cent over the next decade — with artificial intelligence infrastructure emerging as one of the most significant forces reshaping the country's power grid.
The Australian Energy Market Operator (AEMO) is releasing its Electricity Statement of Opportunities report, a ten-year outlook assessing whether the nation's grid can keep pace with rising demand. The findings paint a striking picture: overall electricity consumption across the National Electricity Market is projected to climb from 176 terawatt hours in 2025–26 to 250 terawatt hours by 2035–36 — a figure that excludes energy generated and used privately by homes and businesses through rooftop solar and battery systems.
Data Centres: From 3% to 13% of National Power Use
At the heart of that demand surge are data centres, which currently account for 3 per cent of the nation's energy consumption. By 2035, AEMO forecasts that share will climb to 13 per cent, with electricity use by data centres rising nearly sevenfold — from 5 terawatt hours today to 34 terawatt hours.
The pipeline of new facilities is already swelling rapidly. AEMO estimates there are now 225 data centres in development this year, up from 97 in 2025 — a figure that underscores the pace at which AI-driven investment is reshaping infrastructure planning across the country.
However, AEMO was careful to note a significant gap between proposals and delivery. Its analysis found that 36 per cent of known projects listed in 2025 were subsequently cancelled, including some that had already secured grid connection agreements. Furthermore, data centres that were operational in the first three months of 2026 used only 26 per cent of the total energy capacity they had access to — suggesting that headline pipeline figures may overstate the near-term impact on the grid.
Grid Outlook Cautiously Positive — For Now
Despite the scale of projected growth, AEMO's near-term reliability outlook is relatively reassuring. The operator does not forecast any reliability gaps — where demand outstrips supply — out to 2030. That confidence is underpinned by a record 9 gigawatts of storage and generation that entered the system at full capability in the last financial year, double the rate of the year before.
A further 40 gigawatts of projects are anticipated or committed to be delivered by the early 2030s, representing more than half the current 77-gigawatt capacity of the National Electricity Market.
AEMO chief executive Daniel Westerman said the report reflected genuine progress, while stressing that investment must continue. "The reliability outlook has improved, supported by record levels of new generation and storage, and a strong pipeline of projects expected over the next decade," he said. "As electricity demand continues to grow and ageing generation retires, continued investment in generation, storage, transmission and consumer energy resources will be needed to maintain reliability."
After the early 2030s, however, reliability gaps are forecast to emerge as demand intensifies and coal-fired stations progressively retire. About 15 gigawatts of coal and gas generation will exit the system over the decade, with the closure of power stations at Yallourn in 2028, Gladstone and Eraring in 2029, and Loy Yang A in 2035. Westerman said a fresh wave of investment would be critical to keeping the lights on through that period.
Queensland Mega-Project Illustrates the Scale of Ambition
The national data centre boom is being felt acutely in regional areas. A $31.9 billion data centre complex has been proposed for the Western Downs region of Queensland — set to become the largest facility of its kind in Australia. The project, known as the Western Downs Digital Park, would occupy a 725.5-hectare site near Dalby, approximately 250 kilometres north-west of Brisbane, on land currently used as a 24,000-head cattle feedlot.
Singapore-based developer Zerra DC, which operates hyper-scale data centres across the Asia Pacific, is behind the proposal. The site's location near major regional power stations is a key attraction, and Western Downs Mayor Andrew Smith has welcomed the prospect, describing the region as the "energy capital of Queensland."
"We've built a lot of energy infrastructure in our region that has benefited our region," he said. "So, if there needs to be more built, well, bring it on."
Water use is a central concern. During construction, the site would require around 522 kilolitres of water per day, and each building would need a one-time 26.9-megalitre flush-and-fill process — equivalent to the annual water use of 155 average Australian households. Under regular operation, daily water consumption would settle at around 16.5 kilolitres, sourced from coal seam gas water, rainwater harvesting, recycled wastewater and on-site surface water.
The Toowoomba Regional Council has already passed a motion seeking to ensure data centres do not encroach on drinking-water supplies. Councillor Rebecca Vonhoff said the council felt a deep and personal connection to water security, having lived through devastating droughts. "We have this prime industrial land, we own our water infrastructure, we provide drinking water to our residents," she said.
Federal Rules and Community Consultation Still to Come
At the federal level, the government is refining proposed national rules for data centre energy use, including a requirement for facilities to source power from renewable energy. Queensland has indicated opposition to the suggested framework, and the issue is expected to be discussed at national cabinet.
Western Downs Mayor Smith confirmed that community consultation on the Zerra DC proposal would be rolled out, with residents raising questions around water, power supply and land use. With Australia's data centre pipeline now doubling year-on-year and electricity demand on a steep upward trajectory, how governments and communities navigate that growth is likely to define the nation's energy future well into the next decade.
