Data centres have become a grid connection problem

Data centre load has moved from a footnote in demand forecasting to one of its central variables. The legal work has moved with it.

The numbers

On AEMO's published figures, operating data centres across the National Electricity Market had around 2.2 gigawatts of maximum connection capacity in the first quarter of 2026, with actual demand at around 27 per cent of that capacity and a load factor approaching 90 per cent. That load factor is the important number: this is close to flat, continuous demand, which behaves very differently from the peaky load that much of the network was planned around.

The pipeline is considerably larger than the connected fleet. AEMO's 2026 demand forecasting considered 225 known data centre projects representing around 67 gigawatts of proposed connection capacity, up from 38 gigawatts in the 2025 Electricity Statement of Opportunities. At the end of the March 2026 quarter, 11 large scale projects above 5 megawatts, representing 5.4 gigawatts of maximum demand, were progressing through the transmission connection process, with around 60 per cent of that capacity in New South Wales and 40 per cent in Victoria, most at early stages.

On AEMO's forecast, data centre consumption in the National Electricity Market rises from around 5 terawatt hours in 2025 to 2026 to around 34 terawatt hours in 2035 to 2036, or from about 3 per cent of total grid demand to about 13 per cent.

A pipeline many times larger than the connected fleet is not a forecast that every project proceeds. It is a queue, and queues are where connection risk is created.

What that means for the legal work

A large load connection is a Chapter 5 process, and it competes for the same network capacity and the same assessment resources as generation. The consequences run through the whole project:

• Connection is the critical path. Site selection increasingly follows available network capacity rather than the other way around. A site acquired before connection feasibility is understood can be unusable at the intended capacity.
• Staged capacity. Connection agreements for large loads commonly ramp over several years. The tenure, construction and supply contracts underneath need to be capable of staging with it.
• Curtailment and demand response. Flexible or curtailable load is often what makes an early connection possible. That flexibility has to be capable of being offered contractually, and it has to be reconciled with customer facing availability commitments.
• Firming, not just energy. A flat load profile is not matched by an unfirmed renewable power purchase agreement. The gap is a shaping and firming problem, and how it is solved changes what the operator is exposed to.
• Behind the meter generation and storage. On site generation or storage raises its own registration, classification and connection questions, and interacts with the network connection rather than replacing it.
• Planning and approvals. Water, noise, heat rejection and, in some jurisdictions, specific state policy positions on large loads are live planning issues rather than formalities.

The point of contact with generation

The two queues are connected. Data centre demand is a significant part of the case for new generation, and large load power purchase agreements are becoming a route to market for projects that would otherwise be looking to a government scheme. That means a data centre negotiation is increasingly also a generation offtake negotiation, with the credit, tenor and shaping questions that come with it.

For anyone developing either side, the practical consequence is the same. Connection, land and offtake stopped being three sequential workstreams some time ago.

Sources

• AEMO, Digital demand surge: preparing Australia's power systems for the rise of data centres
• AEMO, NEM forecasting and planning