Rapid growth of Australian data centres ‘requires further investment in clean energy’

The number and size of data centres in Australia is expected to grow in the coming years due to unprecedented demand for cloud computing, global data services and AI-based applications. The Australian Energy Market Operator (AEMO) has created a separate data centre category in its electricity forecasting models.

In 2024, data centres accounted for 2.2% of total grid demand across the National Electricity Market (NEM). Due to the scale, complexity and growth of data centres. AEMO’s 2025 Inputs, Assumptions and Scenarios Report forecast that under its ‘step change’ scenario, which predicts more moderate economic conditions on average, data energy consumption will consume around 6% of NEM’s grid-supplied electricity by 2029-30 and 12% by 2049-50.

Leanne Olden, an expert in energy law at Pinsent Masons, said: “Australia will need to invest more in efficient energy sources such as renewable energy to support the growing demand for data centres and mitigate the associated environmental impacts.”

In separate forecasting created by AEMO, which accounted for the rapid growth in the sector, data centre energy consumption is predicted to reach levels 40% higher than the ‘step change’ scenario by 2029-30.

Oxford Economics, which AEMO engaged to assist in the development of the forecasts, noted that the significant gap between forecasts is due to the high degree of uncertainty of the level of AI uptake in Australia in the future.

The extent to which major ‘hyperscaler’ developers, which account for majority of the energy demand, will invest in the Australian market is also uncertain. Earlier this year, Amazon Web Services announced that it is investing A$20 billion in data centre infrastructure in Australia between 2025 to 2029, with plans to build three new solar farms in Victoria and Queensland to support the expansion.

Olden said: “The forecasted need for data centres represent a significant opportunity for investors into Australia, not only in the data centres themselves, but also in the renewable energy generation assets needed to supply enough power to make the data centre market viable”.