Report Finds Australia’s Electricity Demand to Rise Sharply Over Next Decade

Electricity demand is rising, with a new report warning of supply shortfalls as coal plants retire before replacements are ready.

Eraring coal-fired power station, the largest in Australia, on the shores of Lake Macquarie southeast of Newcastle in New South Wales, Australia. Nick Pitsas/CSIRO

Demand for large-scale energy generation will skyrocket by 21 percent over the next decade, driven heavily by the needs of data centres, according to the Australian Energy Market Operator (AEMO).

The 2025 Electricity Statement of Opportunities report sets out the investment needed to maintain reliable power across the nation.

It warns that increased demand from business and industry, along with the rapid expansion of cloud computing and artificial intelligence, will put additional pressure on the grid in coming years.

AEMO said it was confident new generation, storage, and transmission projects would fuel the need, but only if they are delivered on time.

The report also identifies potential shortfalls in supply as older power plants retire before replacement capacity is available.

Reliability gaps of between 0.025 and 0.8 gigawatts (GW) are possible in both Queensland and South Australia.

In 2024, a record 4.4 GW of new power supply came online. Over the next five years, an extra 5 to 10 GW is anticipated each year, to offset the 11 GW that will be lost as coal-fired power stations close across different states.

Over the next decade, coal power stations at Eraring, Bayswater, and Vales Point in New South Wales, as well as Yallourn in Victoria and Callide in Queensland, are scheduled to shut down.

AEMO CEO Daniel Westerman said the timely delivery of upcoming energy infrastructure was a major priority.

“Considering the large volume of generation retirements over the next decade, the timely delivery of new generation, storage and transmission, along with the operation of consumer energy resources to support reliability, remain critical,” he said in a statement.

Impact of AI, Data Centres

AI is set to chew through power at a rapid rate as it advances and usage increases.

In April 2024, the World Economic Forum predicted that the presence of AI, reliant upon data centres, was doubling every 100 days.

Within five years, AI could be using more electricity than the entire nation of Iceland used in 2021.

Data centres are massive facilities that store and process data 24 hours a day.

They need continuous cooling through air-conditioning and water use, which puts significant strain on the power grid.

There are currently more than 250 data centres in Australia, with more set to be developed—some of them in conjunction with solar farms.