Transgrid Says It Is Unable to Offer Capacity to Prospective Connection Applicants in the Sydney Basin Unless Network Augmentation Is Undertaken

On August 20, 2026, Transgrid wrote to data center connection applicants in a letter headed "Update on network capacity and connection pathway for data centres in the Sydney basin." It sent the update to proponents "at the same time so that decisions can be made based on a clear and consistent understanding of network capacity and connection opportunities." Parts of the letter follow, not the whole.

Capacity in the Sydney Basin

Connection enquiries representing more than 20 GW of data center load have been lodged with Transgrid. The letter calls that "about double NSW's current peak demand."

Transgrid says its earlier letter, of June 17, 2026, confirmed signed connection agreements with data centers representing approximately 1.5 GW of demand in Western Sydney. That demand, it says, "can be accommodated within Transgrid's existing network capacity."

Following those commitments, the letter says, "the existing transmission network in Western Sydney and the broader Sydney basin has limited remaining capacity to support additional large-scale data centre connections." Further capacity "can only be made available by augmenting the transmission network." The letter says this reflects "the interconnected nature of the Sydney basin transmission network," where new large-scale loads in one part of the network "affect capacity across the broader system." As such, Transgrid "is unable to offer capacity to any prospective connection applicants in this region unless the appropriate network augmentation is undertaken with the connection."

Enquiries are not connections. What a lender can count in the Sydney basin is what is signed, and anything beyond it waits on transmission works that the letter describes and does not date.

Augmentation Is Required to Unlock Further Capacity

Transgrid's assessment, "based on the information currently available," is that augmentation of the transmission network "could unlock up to 2 GW of additional capacity for data centre connections across the Sydney basin." It says the assessment "will continue to be refined as planning work progresses and additional information becomes available."

At a minimum, it expects the works to involve the establishment of a substation at South Creek, new transmission line capacity between South Creek and the Sydney West substation, works at Sydney West, and additional dynamic and static compensation for voltage and reactive power support. For connections remote from those two sites, it adds any further augmentation needed to increase capacity between them and the point of connection.

Where augmentation is needed to facilitate a new data center connection, Transgrid confirms, in line with "recent Commonwealth and NSW announced regulatory reforms," that "the costs of those augmentations will be borne by the data centre proponent creating that need rather than electricity consumers more broadly." Where several proponents use the same works, the costs will be shared between them. Charges for connection assets used by a single proponent are not shared, and remain payable in full by that proponent under existing regimes.

The terms on which the works will be provided, and their costs, the letter says, "are subject to negotiation between Transgrid and proponents."

The letter settles who pays for the works. It leaves the price, and the terms on which the works are provided, to negotiation, and that is the line a lender would want to see turned into a signed number.

Allocation and Next Steps

As the works create capacity, Transgrid intends to allocate it "through a market-led, first-to-commit approach" across both transmission and distribution networks, while system security and reliability are maintained. Capacity for data centers "will be treated as committed and allocated only once the proponent enters into a connection agreement on either the transmission or distribution network." Transgrid says it recently published a Network Capacity Allocation Policy that explains its approach.

Based on the current level of connection interest, Transgrid's assessment is that the remaining capacity in the Sydney basin, "including any capacity unlocked through the augmentations described above, could be committed within the coming months."

The remaining capacity was worked out with no allowance for "as available" or dynamic capacity connections. The letter says, "While these arrangements may offer future opportunities, further work is required with AEMO and data centre proponents before they can be implemented with confidence." Until the operational framework for them is better understood, Transgrid "does not consider it appropriate to rely on them when allocating available capacity."

The letter says Transgrid's customer connections team can also help applicants explore all available connection options, including locations able to support future growth, among them areas in regional New South Wales "such as the Hunter and Riverina regions." Further information on those regional connection opportunities, it said, would be provided in Transgrid's upcoming 2026 Transmission Annual Planning Report.