Connected for More Than They Use: Data Centers in AEMO's 2026 Electricity Statement of Opportunities

The Australian Energy Market Operator, AEMO, has published its report "2026 Electricity Statement of Opportunities for the National Electricity Market", the NEM. It is dated August 2026, and its cover calls it "A 10-year outlook of investment requirements to maintain reliability in the National Electricity Market." Data centers have a section of their own in it. "Rapid growth in cloud computing and AI is driving increased electricity consumption from data centres across the NEM," the report says, and "AEMO forecasts data centre loads separately from traditional LILs," its short form for large industrial loads. This article reports some of the report's passages on data centers, and its quotations keep the report's spelling, "data centres."

Well below their connection capacity

The operator has looked at what data centers actually draw. "As of quarter 1 2026, operating data centres across the NEM are estimated to have a total of 2.2 GW of maximum connection capacity provided by distribution network service providers (DNSPs) and TNSPs." Yet "to date, data centres have been operating with a relatively flat load typically well below the maximum connection capacity." In that quarter, the report says, actual demand "suggests an aggregate utilisation of 27% of this maximum connection capacity for currently operating data centres, at a very high load factor nearing 90%."

The report expects use of that capacity to rise as data centers mature. It calls the current figure "relatively low", and "AEMO estimates that a mature fleet of data centres, considering planned capacity redundancy and diversified compute profiles, will average 45-51% average utilisation depending on data centre type." A footnote says the operator "applied assumptions informed by analysis undertaken by the International Energy Agency." And "Data centres often advise an expectation to increase their utilisation over five to 10 years as they ramp towards full capacity, suggesting that existing data centres will continue to increase demand in the near term."

A connection used at a fraction of its maximum is network capacity waiting for its load. Who pays for it while it waits is a question these passages do not answer.

The shape of the load is in the report too. Its chart of June 2026 shows "the aggregate 30-minute demand for data centres across NEM regions", and "data centre demand is observed to be relatively flat, with only small variation between peaks and troughs." The lowest demand comes on non-working days, when, in the report's words, "compute requirements are lower."

Proposed, and canceled

Network service providers "have reported a substantial increase in connection interest in data centres between 2025 and 2026, with 225 projects advised to be in various stages of the connection process in 2026 in the NEM." Many have also been canceled. "While many continue to be proposed and developed, approximately 36% of the known projects in AEMO's 2025 NEM ESOO project list have since been cancelled. Projects were cancelled in all stages of development, with more than 30% of projects cancelled that were previously classified by NSPs as 'committed'." The report adds that this label "typically means that a connection agreement is in place".

The capacity asked for rose. "Total proposed connection capacity across all development stages increased from 38 GW to 67 GW in AEMO's 2026 assessment." A note under the chart says the data came from network providers "between February and May 2026" and that since then "AEMO is aware of increasing interest in Queensland than is represented in these 2026 ESOO forecasts."

Committed projects, which typically have a connection agreement in place, were among those canceled. For a lender, a signed connection is a milestone on the way to a load, not proof that the load will come.

What the forecast expects

Data centers are estimated to use around 5 TWh in 2025-26, the report says, or 2.8% of the NEM's operational consumption. Under one of its scenarios, called Step Change, that consumption "is forecast to triple" to around 15 TWh, or 7.8% of forecast operational consumption, by 2029-30. By 2035-36 it is forecast to "grow nearly seven times" to around 34 TWh, or 13%, "before growth starts to taper off."

Those are forecasts, and the report marks their own limit. A note under the chart says that "Since this forecast was finalised, AEMO is aware of greater interest in Queensland than is represented in these 2026 ESOO forecasts."

Flexibility, so far mostly potential

A later subsection, headed "Potential future demand flexibility from data centres", looks at whether data centers could vary their demand. For now, "Operational data centres currently provide little DSP, and have not been observed to provide material demand flexibility under normal operating conditions." DSP is the report's short form for demand-side participation. Operators "are presently preferring to prioritise service uptime and reliability for their customers," and "While some data centres may include on-site backup generation or storage, these assets are typically reserved to improve the data centre's reliability outcomes, or smooth the load, rather than actively participation in demand response." The report sees "potential for data centres to provide greater demand flexibility over time", and says that "Potential sources of flexibility include load shifting and the use of on-site backup systems, although each is subject to operational and commercial constraints".

• "Load shifting, such as adjusting the timing of non-urgent computing tasks to align with periods of high renewable generation or lower system demand, is technically feasible and has been demonstrated internationally. Implementing load shifting may require additional capital investment and operational changes and may have commercial impacts if customer service level agreements do not make allowances for potential service disruption. This type of flexibility is more likely to be feasible for hyperscale operators with greater control over workloads, and to be less applicable to co-location facilities hosting multiple independent customers, or where risk consequences of data latency are high."
• "On-site backup systems, including embedded generation (typically diesel) or storage, may provide additional flexibility. However, contractual and operational constraints, as well as environmental and regulatory requirements, may limit the use of these systems to emergency situations."

The forecasts do not count on it. "Given limited observed demand response from data centres, current forecasts adopted a conservative approach consistent with observed participation." The report adds that "AEMC recently provided advice to the Energy and Climate Change Ministerial Council (ECMC) on regulatory pathways for data centres, including recommendations to support demand flexibility through market participation, contracting arrangements and connection frameworks." The subsection ends on its own limit, that "the extent to which they translate into measurable demand response remains uncertain and is not reflected in current forecasts."

Load shifting looks most workable where an operator controls its workloads and its customers' agreements allow for disruption. A grid operator would want both in writing before counting on it.