Data centres could add AU$40 billion to Australian power costs, warns Smart Energy Council

The Council estimates that AU$37 billion of the extra cost would fall on electricity users other than data centres. Households would pay AU$9.2 billion of it, with business and industry carrying most of the rest.

Queensland, where the model places two-thirds of the new load, would be hit hardest. The Council calculates that a standard household bill there would rise by AU$367 in 2029-30, about 18% above the current AU$1,988 benchmark, and by AU$1,801 over six years.

Over the same period, households would pay an extra AU$739 in Victoria, AU$661 in South Australia and AU$543 in New South Wales. By market, the Council puts the extra wholesale cost at AU$19.9 billion in Queensland, AU$9.1 billion in Victoria, AU$8.9 billion in New South Wales and AU$2.1 billion in South Australia.

The Smart Energy Council’s figures combine the Australian Energy Market Operator’s (AEMO) consumption forecasts with wholesale prices from an independent market model published in September 2026.

That model adds 5,000MW of data centre demand running at about a 90% load factor, on top of what AEMO already forecasts, and lets new generation and storage respond. The price rise is what customers pay while that response catches up.

In Queensland, the model shows the wholesale price rising by AU$69/MWh in 2029-30. The Council noted that wholesale prices in the state have averaged about AU$70/MWh so far in 2026, and that wholesale electricity makes up AU$725 of the benchmark household bill.

The Council describes the scenario as a stress test, not a forecast. At about 39TWh a year, 5GW is more than AEMO’s own high-growth case adds by 2036. The figures cover wholesale costs only, excluding network charges, retail margins and state rebates.

It also says the model places no limit on how quickly new supply can be built, which makes the result a low estimate. The model does not include flexible data centre demand, which would lower the cost.

Data centre pipeline outruns AEMO forecasts

As of 30 June, AEMO had 17 data centres with 9GW of connection capacity in its transmission queue, 1.4 GW of which was already under implementation, and none of it in Queensland.

Network businesses have told AEMO of 67GW of proposed data centre capacity, up from 38GW a year earlier, although AEMO says this pipeline is not a demand forecast.

AEMO’s 2026 Electricity Statement of Opportunities expects data centre consumption to grow from about 5TWh in 2025-26 to 34TWh by 2035-36, lifting its share of grid supply from 3% to 13%. The Council said this understates Queensland, as it excludes the 2.16GW Zerra facility and Quinbrook’s 800MW Supernode.

Timing is the central issue. A data centre can be built and energised in two to three years, while new transmission typically takes five to 10 years or more, as PV Tech Premium found in its analysis of Australia’s data centre boom. New South Wales and Victoria currently host around 80% of the country’s data centre capacity.

Solar PV plants take an average of 21 months to move from financial close to full operation, according to the Clean Energy Council. It reported that solar made up 92% of the 2.6GW of large-scale generation reaching financial close in the first half of 2026.

More supply is queuing up. Solar and battery storage have lifted the NEM connection pipeline by 43% to 80.9GW, but around 88% of that capacity remains at the application or implementation stage.

Some operators are already contracting new capacity. In April, Amazon signed nine power purchase agreements (PPAs) totalling 430MW, eight of them pairing generation with co-located battery storage. The deals support the company’s AU$20 billion data centre investment in Australia, due by 2029.

Legislation to decide who pays

The Council said that about 90% of household costs could be avoided if new data centres were matched with renewable energy and storage.

It bases this on Clean Energy Finance Corporation (CEFC) and Baringa modelling, which found such matching cuts the 2035 wholesale price rise from 26% to 3% in New South Wales and from 23% to 2% in Victoria. The Council described the figure as illustrative and drawn from a different model.

That question is now before the federal government. In July, Prime Minister Anthony Albanese said large data centres would be legally required to become net generators of renewable energy, to underwrite new supply and to pay their full share of connection costs.

“We will create a legal obligation for the next generation of large-scale data centres to underwrite new power supply,” Albanese said at the time.

The announcement followed calls from a coalition of unions, environmental groups and renewable energy bodies, including the Smart Energy Council, which in February demanded that data centres fund their own firmed clean power.

The Council welcomed the July plan, saying data centres “must bring additional, clean energy, not compete with households and businesses.”

States have not all agreed. Queensland and the Northern Territory opposed the framework at a meeting of energy ministers on 28 July, while the other six jurisdictions backed it.

Federal energy minister Chris Bowen responded in August that the standard would be national.

“States will be free to add more rigorous requirements, but not to water them down,” he said, in a speech that set out a federal floor for data centre obligations.

According to the Council, National Cabinet later left room for gas firming and for exemptions through the Australian Energy Regulator. Queensland and the Northern Territory want their state-owned generators to supply the new load.

Market bodies and states are also moving. The Australian Energy Market Commission (AEMC) has published a framework for data centre energy rules, including certificates from new renewable energy generation and contracted firming, while New South Wales has introduced a bill to control grid access for large loads.

The Council argued that weaker rules in one state would affect customers across the NEM, since electricity is traded between interconnected states. It said data centres should also carry the cost of any lag between their demand arriving and new supply coming online.

The federal government aims to pass legislation early in 2027.