Surging demand in Australia for AI to double power usage by 2025

June 25, 2026 — 12:00

Home electricity use is expected to almost halve over the next 25 years due to Australia’s rapid adoption of rooftop solar panels and batteries, but overall grid demand could double due to business power use and energy-hungry data centres.

The Australian Energy Market Operator has amended its 25-year roadmap for the transformation of the electricity grid to reflect the transformative increase in the number of home battery installations and growing demand for data centers to power AI tools.

Data centers like this one in the US state of Virginia consume enormous amounts of electricity.Bloomberg

There are already more than 600,000 homes across the country that have their own battery systems, allowing them to store rooftop solar energy during the day and discharge it after sunset to power their homes.

Millions more people are expected to install batteries by 2050, and the market operator says this will reduce household electricity consumption by 44 percent, even as there are more electrical appliances and electric vehicles in homes. This will benefit not only households but also consumers around the network by smoothing out the sharp increases in wholesale electricity prices that occur around 6pm, when solar generation decreases and demand typically increases.

The updated roadmap, to be published on Thursday, identifies growth in home-scale solar and batteries as a key cost-cutting factor for the overall price tag of Australia’s energy transition, as it reduces the need for grid-scale investment. The report reduced the expected need for construction of new transmission links by 1435 kilometers since its previous assessment in 2024.

AEMO chief executive Daniel Westerman said consumers investing in solar power and batteries were bringing “real value to the entire grid”.

“We still need transmission to share the lowest-cost electricity across the grid, but that means not as much energy is needed,” he said.

But other cost pressures have led to a $7 billion increase in the total energy transition, which is expected to cost Australia $106 billion by 2050.

While most of the nation’s coal-fired power plants reach the end of their operating lives by the mid-2030s, major price pressures continue to mount in the sector due to the massive capital required to modernize the grid, meet growing demand, and maintain reliability.

AEMO said the cost explosion will be caused by inflation, which increases the costs of critical projects, especially wind farms and transmission lines. A $3 billion bill would be required to ensure what is known as “system security.”

While electricity use in homes has fallen sharply, demand for electricity nationwide is expected to double due to business use and data centers.

Australia is home to 162 operating data centers today, consuming approximately 2 percent of total electricity demand on the east coast. The market operator assumes that demand could increase fourfold to almost 10 percent by 2050.

AEMO’s report reaffirms its recommendation that the best way to transform the energy market in the future and keep people’s electricity bills as low as possible is to develop a mostly renewable grid, supported by more storage, power lines and gas-powered generators.

AEMO said renewable energy currently provides almost half of the electricity on the grid and remains the cheapest way to replace Australia’s coal-fired power stations.

“Almost 40 percent of the coal fleet has been retired and renewable energy is fast approaching the point of meeting half of annual electricity needs,” he said.

Energy Minister Chris Bowen said unreliable coal-fired power plants were driving up electricity bills.

“So our plan is to deliver cheaper, cleaner energy by using our dominant solar and wind energy to protect our grid from global variability and lower your bills,” he said.

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