Australia’s energy system has been shaped by extreme weather events, record electricity demand and accelerating investment in renewables, according to the Global Energy Trends 2026: Australia Regional Outlook.
In 2025, extreme weather events hit Australia, including Cyclone Alfred and extreme flooding in Queensland and New South Wales in 2025 caused widespread outages, leaving communities and industries dealing with power and communication breakdowns.
The Australia’s National Climate Risk Assessment noted that the country is likely to experience more intense and extreme climate hazards, increasing the pressure on critical infrastructure, such as power lines and telecommunications.
Against this backdrop, the Australia government has set up a 2035 climate change target at a 62%-70% reduction in emissions from 2005 levels, highlighting the role of renewable energy and low-emissions manufacturing in driving the transition.
However, rising energy demand from expanding AI technologies and data centres are presenting significant challenges to Australia’s emissions reduction targets. Australia is experiencing a rapid expansion of data centres, driven by cloud computing, artificial intelligence, and digital services. As a data centre hub, Australia is currently fifth in the world behind the USA, China, the UK and Germany for data centre built-out capacity and currently has more than 300 data centres nationally. Morgan Stanley Research forecasts that most of the load growth in Australia is expected to emerge in New South Wales and Victoria. Overall, the analyst expects data centre demand to increase from 1050MW in 2024 to nearly 2500MW in 2030.
At the same time the change, Australia’s energy market is entering a new phase of large-scale transformation, driven by record investment in battery storage, hybrid systems, and renewable generation. With grid-scale batteries accounting for nearly half of all capacity in the development pipeline, and a growing share being grid-forming, the foundation for a more flexible and resilient electricity system is rapidly taking shape.
Australia’s growing pipeline of generation and storage projects signals strong investor confidence and technological progress. As these projects move from concept to operation, they will play a central role in shaping a cleaner, smarter, and more secure energy future for the National Electricity Market.
Looking ahead to 2030, the report concludes that Australia’s energy system will continue to move from a grid dominated by coal to one increasingly powered by renewables, supported by flexible gas generation, battery storage.
But the transition is not without significant challenges. Transmission infrastructure remains the largest constraint to Australia’s clean energy ambitions. Connection queues are lengthening as renewable developers compete for limited grid access.
But the system will need to adapt not only to decarbonisation but also to the physical realities of a changing climate. Investments in grid resilience, energy storage, and climate-proofed assets will be critical to sustaining both affordability and security.
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