Victoria’s energy planners are rewriting long-term electricity forecasts to account for an unprecedented boom in energy-hungry data centres as they prepare a new 25-year blueprint for the state electricity grid.
Draft guidelines for VicGrid’s 2027 Victorian Transmission Plan reveal that the state will, for the first time, explicitly model data centre growth in its forecasting, guiding investment in the state’s electricity system over the next three decades.
Planners also warn that Victoria’s transition to renewable energy could face a multi-year delay driven by fading community acceptance, critical infrastructure bottlenecks and unco-ordinated data centre growth, modelling a scenario where the state must lean heavily on gas to keep the lights on.
Unlike the 2025 plan, the 2027 blueprint will extend to 25 years as Victoria prepares for the closure of its remaining coal-fired station by 2035 and amid increasing uncertainty over how quickly electricity demand will grow.
The draft plan developed by VicGrid, the state government body tasked with restructuring Victoria’s electricity grid, says electricity demand forecasts must be updated to reflect data centre development amid a rapidly evolving energy market.
“VicGrid will develop its own forecast for data centre demand in Victoria based on AEMO forecasts, connections enquiry data and other sources to ensure the VTP is designed with the most up-to-date information,” the guidelines state.
The shift comes as Melbourne accelerates to become the nation’s fastest-growing digital infrastructure market, threatening to collide directly with the state’s tight energy deadlines.
The Allan government has vowed to aggressively court major tech players to the state to build the electricity and water-intensive warehouses, and is relying on the resulting construction boom to drive economic growth in the state.
Over the next 12 months, the agency will develop new electricity demand forecasts and test a range of scenarios to determine what generation, storage and transmission infrastructure will be required to keep the system reliable.
The draft guidelines consider three core scenarios for Victoria’s energy future. The first assumes the state’s energy transition proceeds largely as planned, with renewable energy, storage and offshore wind targets met alongside steady growth in electricity demand.
The second considers a faster transition, with higher electricity demand and stronger growth in data centres.
The third explores a more difficult pathway, with delays to major energy projects combined with uncoordinated growth in electricity demand from data centres, concentrated in metropolitan Melbourne.
Under that scenario, major power line projects, renewable energy targets and the rollout of offshore wind miss their deadlines by two years. If this occurs, the state will face “increased gas supply and augmentation challenges” to keep the lights on.
The planning process will also test whether Victoria’s recently declared renewable energy zones are sufficient to meet the state’s long-term energy needs.
The Allan government this month formally declared five renewable energy zones across regional Victoria and a Gippsland shoreline zone to support offshore wind, covering about 1.8 million hectares in total.
VicGrid Chief Executive Alistair Parker said he welcomed the first five zones, which would improve coordination of solar, wind and battery projects and reduce the need for unnecessary transmission infrastructure.
“Victoria’s coal-fired power stations are due to close over the next 10 years and a significant amount of new renewable energy development is needed to make sure we can meet increasing demand for electricity,” he said.
The Australian Energy Market Operator (AEMO) has a long-term pipeline of Victorian connection requests totalling 18 gigawatts – double the state’s current maximum demand – though how many projects proceed remains highly uncertain.
The operator’s latest quarterly National Electricity Market report said there were 1.5 gigawatts of data centre capacity at the application stage and another 0.7 gigawatts approved or under construction.
The prospect of expanding renewable energy development could heighten tensions in regional Victoria, where new high-voltage, above-ground transmission lines have become a major point of community opposition. Transmission lines are the infrastructure required to connect far-flung renewable energy zones to major cities.
The expanding transmission build-out has become a political flashpoint ahead of November’s state election.
The Coalition has pledged to review Victoria’s transmission plan if elected, arguing more generation should be located closer to where demand is concentrated in Melbourne.
Opposition energy spokesman David Davis said rooftop solar and batteries on commercial and industrial buildings could reduce the need for major transmission projects across regional Victoria.
“We will support these developments, which will minimise land use conflict and deliver clean power where it’s needed,” he said.
The Coalition has also committed to pausing contentious transmission projects, including VNI West, while repealing laws that give planners accelerated land-access powers. This comes after years of opposition to major transmission projects from landholders and the farming community.
One Nation has targeted the transmission rollout amid its surge in support in Victoria, vowing to halt construction of new transmission lines for renewable energy projects, claiming farmers were shouldering the burden of the “net zero” transition.
The VicGrid report acknowledged the risk of declining community support for renewable energy infrastructure, with the guidelines warning that changing levels of “social licence” could affect the timing and delivery of new generation and transmission projects.
A spokesperson for Energy Minister Lily D’Ambrosio said the government was working with the Commonwealth to ensure data centres don’t compromise grid stability and was investing in renewable energy generation to prevent additional costs for households and businesses.
“Jess Wilson’s plan to delay transmission will add up to $1700 a year to power bills and expose Victorian households to blackouts,” she said.
“Only Labor will build the renewable energy projects needed to keep the lights on and maintain the lowest electricity prices in the country.”
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Daniella White is a state political reporter for The Age. Contact her at da.white@nine.com.auConnect via X or email.From our partners
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