Australia’s artificial intelligence investment boom is running into a physical constraint in Sydney, where the electricity transmission network does not currently have enough spare capacity to connect the wave of proposed new data centres.
Transgrid has received enquiries representing around 20 gigawatts of new large electricity demand, much of it associated with data centres, while western Sydney is already approaching its practical transmission limits.
The grid operator says new large connections will require developers to fund network upgrades rather than passing the cost onto existing electricity customers.
Those upgrades could unlock up to 2 gigawatts of additional capacity, but major transmission projects can take years to plan, approve and construct.
The issue is beginning to influence where Australia’s next generation of AI infrastructure is built.
Developers are increasingly examining regional NSW, including areas with greater access to renewable generation and transmission infrastructure, rather than concentrating every new facility around Sydney.
More than 60 data centres are already operating or under construction across NSW, while another 20 proposed projects represent more than A$50 billion of investment.
The bottleneck demonstrates how quickly the economics of artificial intelligence have moved beyond chips and software.
For Australia, access to electricity, transmission lines and new renewable generation may ultimately determine how much of the global AI infrastructure boom the country can accommodate.
