Beyond the Transition: Powering the Next Wave of REZs

For decades, electricity network planning was based on relatively predictable and stable patterns of demand and supply. But the energy transition has changed that, reshaping where and how energy is both produced and used.

This year’s Transmission Annual Planning Report begins planning for a future where electricity powers everything from transport to data centres. For the first time, Transgrid has outlined multi-decade expectations for how the Greater Sydney supply corridors could evolve to support a clean energy future. We’ve also shared our evolving thinking on new remote inland renewable energy opportunity areas in NSW their potential to power future prosperity across the state.

Data centres: The new demand load

One of the most striking energy demand forecasts in this year’s report is for data centres, which are emerging as among the most significant new electricity users in NSW – requiring far more energy than electric vehicles over the next decade. Very large data centres, some requiring 1GW or more, are now seeking to connect to the NSW grid. Interest is accelerating, and Transgrid has received more than 10 GW of connection enquiries and 4 GW of formal applications from data centre developers.

Western Sydney has emerged as a hotspot, due to its strong power infrastructure, available land, and high renewable energy penetration. Considered as the third largest economy in Australia, it also has some of the best digital connectivity in the country, including the highest number of international internet cables.

Until now, the rise in data centre energy demand has been offset by more efficient computing and smarter energy management. But that trend is shifting. With AI workloads accelerating, energy use is expected to climb rapidly. Unlike traditional cloud data centres, AI-optimised facilities use larger, more power-intensive chips and cooling systems that often go beyond standard air-based solutions.

Accommodating this new demand will be a challenge. But it also presents a major opportunity. Data centres could become a key part of the NSW economy, attracting high-tech investment, creating skilled jobs and driving innovation. They could also enable a new export opportunity for the state: turning renewable megawatts into megabytes of digital value.

We are still in the early stages. It’s not yet clear how many of the proposed data centres will go ahead, or how quickly their energy demand will ramp up. We need proactive planning to ensure the network can adapt to this fast-evolving landscape, while balancing land, water and power needs responsibly.

Reinforcing supply for Sydney

Sydney is Australia’s largest and most complex energy demand centre. As coal power stations retire, electrification accelerates and new energy users emerge, Greater Sydney will face a growing supply gap – even with the projected growth in local supplies from consumer energy resources (CER) and distribution REZs.

More energy will need to be supplied from further afield – including the New England, Central-West Orana and South-West REZs. Transgrid is supporting the Hunter Transmission Priority Transmission Infrastructure Project to reinforce supply to the region from the north, but this project alone will not be sufficient.

Transgrid analysis suggests that at least 6 GW of additional firm capacity will need to be developed within the Greater Sydney region by 2035 to maintain reliable and affordable energy supplies. This is an enormous task. There are several technologies that can contribute – including peaking generation powered by natural gas and liquid fuels, utility-scale battery energy storage systems (BESS) and demand-side participation enabled by distributed storage, virtual power plants and time-shifting electricity use.

These technologies – likely in combination – offer strong promise. However, the limited availability of gas infrastructure and the uncertain timeframes for scaling up coordinated CER and demand flexibility mean that transmission reinforcements will also be needed.

Transgrid is therefore investigating options to reinforce supply from southern NSW into Sydney as part of the Sydney Ring South project. This would supplement local resources with supplies from renewable generation and firming from across NSW and ensure that emerging load growth can be met within a resilient and flexible power system.

Access the latest interactive data visualisation and mapping information at the Transgrid Connection Opportunities Portal.