New Rules in ‘Package 2’
The Australian Energy Market Commission (AEMC) – which sets the rules that underpin Australia’s National Energy Market (NEM) that interconnects five eastern and southern states – is seeking stakeholder feedback on new rules, dubbed ‘Package 2’, which seeks to address the projected growth of large-scale electricity users, particularly data centres driven by AI development [1].
“The rise of artificial intelligence is driving unprecedented demand for data centres in Australia, with some facilities potentially requiring as much electricity as small cities,” said AEMC Chair Anna Collyer. “Package 2 proposes new standards to ensure these facilities can respond appropriately during power system disturbances and don’t inadvertently make problems worse during system events.”
She added that when coupled with the Package 1 improvements to the (NEM) access standards – which focus on making it faster and cheaper for renewable energy generators to connect to the grid – the two mark “the most significant modernisation of the NEM technical connections standards since 2018.”
Throughout the Access Standards Review, the Australian Energy Market Operator’s (AEMO) consultation revealed that multiple potential new data centre loads larger than 100 MW and up to 600 MW are at the connection enquiry or pre-application phase, and some projects propose to connect within the next two years.
AEMO runs the NEM
In the consultation paper, AEMO figures were used to show the size of connection enquiries and connection applications for new data centres. While it pointed out that only a subset of the connection enquiries will inevitably be connected, the data indicates that there is likely to be significant growth in the size of data centres connecting to the NEM in the coming years. [Figure below]. 
AEMO’s proposal to revise the technical standards for large loads is based on its view that large loads (particularly those with significant converter technology components) have the potential to have adverse impacts on the power system.
AEMO is particularly concerned with how large loads would behave during a power system disturbance, including whether the behaviour of these loads could act to worsen a disturbance through the impact on system frequency, voltage and stability. For example, if a large load of approximately 100MW were to disconnect from the power system inresponse to a high frequency event, this would further destabilise system frequency, thereby worsening the disturbance and risking broader impacts on electricity supply.
As a result, it is proposing rule changes to better manage how large electricity users—like data centres—connect to the grid. With a growing number of large loads (100–600 MW) such as hyperscale data centres on the horizon, current access standards in the National Electricity Rules (NER) are no longer sufficient. AEMO aims to ensure power system security by updating technical requirements, defining clearer standards for large loads, and improving system resilience.
This includes better protections, enhanced information sharing, and stronger frameworks for managing system strength and disturbances. These changes are designed to make grid connections more secure and reliable for both existing and future large-scale customers.
The US Eastern-Interconnection large load incident
The potential need for reforms in this space was highlighted by a recent incident in the United States where 60 data centres consuming 1,500 MW of power disconnected simultaneously during a system disturbance. The major power system incident in North America’s Eastern Interconnection highlighted the risks large loads like data centres can pose. A transmission line fault triggered deep voltage disturbances, leading to 60 data centres in Northern Virginia disconnecting simultaneously, causing a sudden loss of 1,500 MW of load.
The issue stemmed from a shared but undisclosed protection system feature in the data centres, which automatically disconnected them after multiple fault events. The grid operator was unaware of this design, and the data centres didn’t reconnect automatically, relying instead on backup UPS systems. This caused a temporary frequency spike and sustained drop in demand. The incident underscored the importance of better visibility, coordination, and technical standards for large, sensitive loads.
Next steps
The Commission is inviting stakeholder feedback on Package 2 by 19 June 2025 and the consultation is already attracting ministerial interest. As part of its role, the AEMC provides expert advice to federal, state, and territory energy ministers through the Energy and Climate Change Ministerial Council (ECMC). In its 14 March meeting, the ministers agreed to work with AEMO and other market bodies on the implications for Australia’s energy system presented by projected growth in data centres being established in Australia. This includes investigating options to minimise system impacts, maximise potential system benefits and explore whether existing regulatory frameworks for data centres remain appropriate. The ECMC plans to next meet in New South Wales in mid 2025.
[1] https://www.aemc.gov.au/rule-changes/improving-nem-access-standards-package-2
[Author: Simon Dux]
