Head north to the Hunter. The case for non-metropolitan Sydney data centres
Where should you be building a data centre to be energised in 2028+?
Look to the Hunter region, located north of metropolitan Sydney.
Coal exits leave behind an underutilised high-voltage transmission network
What makes this region interesting from an energy system perspective is with the exception of Mount Piper, the Hunter hosts the state’s coal-fired power station generation capacity:
Bayswater Power Station at Muswellbrook (2,715 MW) owned by AGL. Expected closure 2033.
Eraring Power Station at Lake Macquarie (2,800 MW) owned by Origin Energy. Expected closure 2029.
Vales Point Power Station at Lake Macquarie (1,320 MW) owned by Delta Electricity. Expected closure 2033.
This generation is forecast to close thereby creating an intriguing proposition – the existing transmission infrastructure capacity could be soaked up by a large inverter-based load data centres.
Source: NEM Generation Information April 2026
The Hunter has a significant program of transmission and storage projects which are not stuck in planning, they are being delivered right now for the NSW Electricity Infrastructure Roadmap
When the coal-fired power stations retire in 2029 and 2033, energy will largely be pulled from generation outside of the Hunter region. To deliver this energy and firming capability, the key projects underway in the Hunter region include:
Waratah Super Battery
A Priority Transmission Infrastructure Project (under NSW’s Electricity Infrastructure Investment Act 2020) to alleviate constraints on the existing transmission network during periods of high demand.
Transgrid is upgrading the existing network to maximise the benefits of the Waratah Super Battery project including uprating a number of 330kV transmission lines (including the Yass to Marulan, Yass to Collector, Collector to Marulan and Bannaby to Sydney West Lines) and existing substation assets that would otherwise limit the Waratah Super Battery ability to increase power transfers into the Hunter and broader area from regional NSW.
Hunter Transmission Project Stage 1
The EnergyCo project includes a new double-circuit 500 KV line between new Bayswater South and new Olney 500 kV switching stations to help import electricity from the Central West Orana and New England REZs.
HTP is an actionable project in AEMO’s 2024 Integrated System Plan and is proceeding as a Priority Transmission Infrastructure Project. It is scheduled for completion by November 2029.
HTP scope includes:
Establishing a new Bayswater South 500 kV switching station near the existing Bayswater substation, and cutting into the existing 500 kV network
Establishing a new 500 kV switching station in the Olney State Forest, near Eraring, and cutting it into the existing 500 kV network
Constructing an approx. 100km new 500 kV double-circuit line between the two new switching stations
Installing new 500/330 kV 1,500 MVA transformers at Eraring substation
Installing line reactors at the Bayswater South switching station on the new double-circuit transmission line
There is also a HTP Stage 2 contemplated which may be required after 2033 to unlock further generation capacity from future stages of CWO and New England REZ. Stage 2 would look to be scoped as:
Developing a second 500 kV double-circuit between Bayswater and Eraring, using Transgrid’s existing easement by demolishing the 330 kV single-circuit line and rebuilding it as a 500 kV double-circuit line.
Hunter Central Coast REZ
Ausgrid as Network Operator is building the HCC REZ which will bring online an additional 1 GW of capacity. This is being delivered in stages, 350 MW in 2026, 280 MW in June 2028, and 370 MW in July 2028.
Source: Transmission Annual Planning Report 2025
In lieu of coal exits, there is transmission line capacity in the Hunter region
Transgrid’s TAPR 2025 notes that there is no prescribed augmentation projects planned to meet network performance requirements of NER Schedule 5.1 in the Newcastle and Central Coast region over the next 10 years.
This is significant as every other area of NSW and ACT – Greater Sydney, Northern NSW, Central NSW, Southern NSW and ACT and South Western NSW all declare a list of planned projects required to be undertaken.
This means for the Hunter, data centre developers are not relying upon Transgrid to upgrade or deliver new projects to ensure network capacity.
On a transmission line-by-line analysis, the AEMO Operations and Planning Data Management System snapshot provided in the Transgrid 2025 TAPR highlights to N-1 utilisation as a percentage of the major transmission lines across the state.
Of importance for analysing the Hunter region and its potential capacity for data centres, the below transmission lines and areas are of interest.
Newcastle to Eraring and Vales Point:
Line 92: 49% N-1 utilisation (Eraring to Vales Point)
Line 24: 50% N-1 utilisation (Eraring to Kemps Creek)
Line 94: 36% N-1 utilisation (Newcastle to Waratah West)
Line 9W: 32% N-1 utilisation (Waratah West to Tomago)
Line 9C5: 31% N-1 utilisation (Tomago to Brandy Hill)
Liddell (former Coal Power Station site) to Muswellbrook and Bayswater:
Line 5A4: 28% N-1 utilisation (Bayswater to Wollar)
Line 5A3: 27% N-1 utilisation (Bayswater to Mt Piper)
Source: Transmission Annual Planning Report 2025
Data centres can raise the minimum demand profile and therefore abate the risks of system strength gaps from FY28 to FY30
In NSW, when coal generation retires, traditional network flows will change and voltage support across the network will be reduced.
During periods of low renewable energy output, NSW will increasingly rely on long-duration dispatchable capacity from Snowy Hydro units. Transgrid is seeking to build the southern backbone of HumeLink and Sydney Ring South with its ability to transfer power from Southern NSW northwards will therefore be critical to energy reliability in the state.
For the Hunter region specifically, four synchronous condensers, each providing 275 MVA fault current, or a 200 MW grid-forming BESS is required to be installed by FY28 for the Hunter Central Coast REZ.
Transgrid forecast there is a risk in the minimum level of system strength before sufficient synchronous condensers come online. The earliest possible delivery of synchronous condensers under the regulatory process is expected between March 2029 and February 2030. Under the delivery timeline, gaps to the minimum level system strength requirements are expected to occur up to 2% of the time for all of FY28 and 5% of the time for all of FY30.
When it comes to network system security and reliability, data centres are not a bug, they are a feature. Locating a data centre in the Hunter would have important, well-timed benefits of lifting the minimum load demand profile, thereby providing a critical system security benefit to the network which can act as an insurance product while Transgrid takes delivery and installs the necessary synchronous condensers required to replace coal generation.
What does this article mean for data centre developers and investors
For the next phase of data centre deployment beyond metropolitan Sydney, I would recommend beginning a three pillared search to secure land for your next data centre location. Fibre and water are a lower order issue, speed to compute, synergies with a skilled workforce and access to power remain the unlock.
I would therefore be doing the following three tasks:
‘Follow the 500 kV line’ and substation build of the Hunter Transmission Project and Waratah Super Battery.
Review the favourable N-1 utilisation line ratings and discern if there is land available to cut in or augment an existing substation.
Consider co-locating at existing power station sites to leverage the substantial transmission infrastructure already in place.
Key sources used for this article: Transmission Annual Planning Report 2025, NEM Generation Information April 2026.
This is not investment advice. Happy to discuss any of this further, and can be contacted by email: info@followthebottleneck.com