Data centres could add 26% to NSW wholesale power prices. New rules aim to make them pay

Data centres' share of the grid is forecast to quadruple within a decade. One study warns of a sharp rise in wholesale power prices unless operators bring their own clean energy, which is exactly what Canberra now proposes.

Australia's data centres used about 5 terawatt hours (TWh) of electricity from the main east coast grid in 2025-26, around 3 per cent of the total. By 2035-36, the Australian Energy Market Operator (AEMO) forecasts that will reach 34 TWh, about 13 per cent.

That is a lot of new demand to meet, and the question of who pays for it is now live.

In June 2026, the Climate Council published modelling suggesting that if data centre growth is met largely by gas rather than new renewables, wholesale electricity prices could rise by up to 26 per cent in New South Wales and 23 per cent in Victoria by 2035. The scenario assumes rapid data centre expansion "without any increase in renewable capacity, forcing greater reliance on gas and delaying coal closures."

"Data centres are like a giant snowball rolling down the mountain. If they don't bring new, low-cost renewables and storage with them and pay for the energy and water infrastructure upgrades they need, they'll be dumping massive costs onto households and businesses," said Joel Gilmore, an associate professor at Griffith University and a Climate Councillor.

Two cautions matter here. The 26 per cent figure describes a worst case. And it applies to wholesale prices, which are only one part of what households pay on their bills alongside network charges and retail costs.

The government's answer is a "bring your own power" model. A consultation paper from the Department of the Prime Minister and Cabinet, open until 9 October 2026, proposes that large data centres, broadly those above 100 megawatts, "bring forward new renewable generation to fully offset their energy demand." They would also have to manage their use during peak periods and avoid pushing up network costs for other users. Smaller facilities below 30 megawatts would be excluded.

The industry points to the grid itself. "Most data centre operators connect to the grid. The make-up of the grid is based on government and energy industry decisions," said Belinda Dennett, chief executive of Data Centres Australia.

Whether the rules shield households depends on the detail. Requiring operators to fund new generation should stop data centres simply drawing on existing supply and bidding up prices for everyone else. But building new generation takes years, and connecting it to the grid can take longer, while data centre demand is growing now.

There is also an upside. If operators do underwrite large amounts of new wind, solar and storage, the boom could speed up the shift to renewables rather than slow it.

The 26 per cent figure is a warning about what happens if nothing is done, and something is now being done. The proposed standards put the cost of new supply where it belongs, on the companies creating the demand. We expect the rules to survive consultation largely intact, because they suit both a government worried about power bills and a sector that needs a social licence to keep building. The risk is timing: new data centres can be switched on faster than new wind farms. Household bills are unlikely to feel this in the next year or two. The real test comes later this decade, when AEMO's forecasts start to bite.