Data centres told to pack their bags for the regions after house full sign goes up in Sydney

Australia biggest transmission company, Transgrid, has effectively put the “house full” sign up for data centres in Sydney and urged those looking for a connection to the grid to look at the regions for spare capacity.

Trangrid, which operates the transmission network, the so-called backbone of the grid, in New South Wales, says forecast data centre demand is now four times higher than expected a year ago, and its own assumptions are twice that released by the Australian Energy Market Operator in its own demand update just a few weeks ago.

“Hyperscale data centres are reshaping energy demand across the network, while rooftop solar, household batteries and electrification are fundamentally changing how electricity is used,” Trangrid CEO Brett Redman says in a media statement accompanying its annual Transmission Annual Planning Report.

“As a result, the demand forecasts we are working with today look very different to those only a few years ago.”

Transgrid says it has receive 20 gigawatts of data centre enquiries in the last two years, twice the state’s peak demand – and analysis from Baringa Associates suggests actual data centre demand will grow to around 3.5 GW of peak demand by 2035 – twice the equivalent peak demand represented in AEMO’s 2026 ESOO Step Change scenario.

It says it has signed agreements with 1.5 GW of new data centre capacity but that means existing capacity within the Sydney region is now largely committed – apart from that needed for population growth, electrification, EV charging and other demand.

No further capacity will be available until the proposed Sydney Ring South transmission project which is currently seeking regulatory approval, is completed in the mid 2030s.

Transgrid suggests data centres look to the regions and in its report publishes a map showing the potential for new capacity, mostly to the south-west of Sydney but also to the west in Lithgow, and in the north of the state.

“Locating new data centres closer to renewable generation, such as near Renewable Energy Zones (REZs), can reduce transmission congestion, improve utilisation of existing infrastructure and more efficiently integrate new renewable energy into the power system while supporting regional economic growth,” it says.

Naturally, they are sited along its own expanding network, including HumeLink and the Hunter transmissions projects.

This would have the happy outcome of amortising some of the costs of the new transmission, which has come under increasingly intense scrutiny given the surging costs of poles and wires and new substations.

“With these projects, and where supported by targeted network augmentations, regions such as Wagga Wagga and the
Hunter could offer large-load connection opportunities comparable to those available in the Sydney region,” it says.

It insists that data centres should carry the cost of any network additions, and is helping the government with drafting legislation to make sure this is the case.

Transgrid’s own report points to the surge in costs, with transmission line costs increasing by 25 to 55 per cent just in the last two years, and substation costs by 10 to 35 per cent. It says this has been driven by higher material and equipment costs, workforce shortages and the volume and complexity of projects under development.