Transgrid, one of Australia’s largest electricity transmission network operators, has called for new rules requiring large data centre developers to pay for the full transmission capacity they reserve, regardless of how much electricity they ultimately consume, arguing the change could reduce network costs for consumers by up to 15 percent while discouraging speculative connection requests.
Speaking at the CEDA NSW Energy Outlook conference, chief executive Brett Redman said the transmission operator was progressing a rule change that would require new large electricity users to pay for their full connection capacity rather than only the electricity they use.
“We are also progressing a rule change to provide further safeguards for consumers,” Redman said. “New large users should pay for their full connection capacity – whether they use it or not.”
He added: “Our modelling indicates it would reduce like-for-like transmission costs for consumers by up to 15 per cent.”
The proposal comes as New South Wales and federal policymakers develop new rules governing the rapid expansion of AI-driven data centre demand, with the Australian Energy Market Commission expected to provide advice to Energy Ministers on data centre electricity requirements this month.
Western Sydney demand accelerates
Redman said data centre investment represented “a once-in-a-generation opportunity” for New South Wales but argued that consumer protections must keep pace with the scale of demand.
“The scale of data centre investment rivals that of energy infrastructure,” he said. “Here in Australia, the investment pipeline is expected to exceed AUD 150 billion. More than five percent of GDP.”
He added that Transgrid had now received enquiries to connect more than 10 GW of data centre load across New South Wales – roughly equivalent to the state’s average electricity demand. “For those of you who subscribe to the phantom demand theory, I can tell you plenty of it is real,” he said.
According to Redman, around 1.5GW of readily available capacity has already been contracted by data centre developers in Western Sydney in recent months. He expects that figure to roughly double in coming months as developers commit to funding further network augmentations.
“Let me be clear – capacity, both existing and augmented, is only made available to data centres after the future needs of Western Sydney homes, businesses and industries have been safeguarded,” he said.
Building on inquiry recommendations
The proposed rule change expands on recommendations Transgrid made to the NSW parliamentary inquiry into data centres earlier this year, where it argued that existing electricity consumers should not subsidise new large loads.
In its submission, the company proposed a range of measures designed to discourage speculative connection requests, including take-or-pay network agreements, prudential security requirements, application fees, exit fees and user-funded network augmentations. It also argued that proponents should fund the network upgrades required to unlock additional capacity while committing to long-term connection agreements.
The submission also highlighted the unprecedented scale of demand facing the transmission network. Over the past 18 months, Transgrid said it had received enquiries for more than 10GW of potential data centre load, with around 6GW progressing towards formal connection applications. Individual projects typically range from 250MW to more than 1.2GW.
Redman reiterated the company’s three guiding principles: support the economic opportunity presented by data centres, ensure existing electricity consumers are no worse off, and move quickly enough to compete for global AI investment. He also signalled that attention would increasingly shift beyond Western Sydney as demand grows.
“As Western Sydney fills, the story is moving into the regions,” he said. “We are now seeing increased interest in places like the Riverina and the Hunter – creating the potential for more balanced economic development across the state.”