What the NSW Energy Minister put on the record
The Electricity Infrastructure Investment Amendment Bill 2026 (the bill) was introduced to the Parliament of NSW on 5 August, with debate adjourned to 15 September.
Per the second reading speech of the bill, you get an insight into what the Minister for Energy sees as the current state of the data centre market, which is:
Around 13 GW of data centre network capacity is in advanced discussion with network providers
Average electricity demand across the state runs between 7.5 and 10 GW
Per AEMO’s modelling, roughly half of Australia’s proposed data centre connection capacity sits in NSW
More than 60 data centres already operate in the state.
A closer look at the bill
Data centres to face new connection charges
The NSW Energy Minister is to:
“Make regulations with respect to large energy users connecting to the electricity network. The bill allows the Minister for Energy to make a regulation to derogate from the National Electricity Law and National Electricity Rules in relation to large energy users.”1
This means the Minister can make changes by signing a briefing note in her ministerial office without needing to go to Parliament to legislate. Either house can move to disallow a statutory ruling however in practice, as the government controls the Legislative Assembly, any challenge would come from the Legislative Council, if they choose to do so.
The regulations will require:
“Capital contributions, connection fees, bonds or other forms of financial security from proponents seeking to connect large energy users to the network.”2
The intent is to charge for, and ideally remove, the ‘phantom’ demand that has caused considerable angst for ministers, public servants and regulators.
The NSW Energy Minister is to gain power to dictate where, when, and how many data centres can connect in the state
The bill also enables regulations to make any necessary derogations from the National Electricity Law and the National Electricity Rules to support the effective operation of a large-load access scheme.
The bill will:
“Expand the existing access scheme framework so that it can be applied to large energy users, including data centres. The access scheme would help manage where, when and how much data centres connections occur in NSW’s electricity network.”3
The design feature worth flagging is the access scheme could have regard to water usage as well as energy.
The government wants transmission delivery to become more competitive
This bill provides greater flexibility by allowing different entities to play different roles in the financing and delivery of major network infrastructure projects. It is seeking to introduce innovative financing and delivery models, involving multiple network operators where that delivers a more efficient outcome.
The bill achieves this by:
“Clarifying that a person may be appointed, authorised or directed as a network operator for the purposes of delivering activities associated with a network infrastructure project—including financing activities—without necessarily owning, controlling or operating the completed network asset.”4
The bill also provides greater flexibility:
“By allowing different entities to play different roles in financing and delivery of major network infrastructure projects.”5
The door is now open for hyperscalers to vertically integrate or infrastructure funds to step in and play a large role in delivering transmission and substation augmentations. But given the government wants new data centre renewable generation to be delivered by the five renewable energy zones, this will mean new entrants are subject to NSW Government’s EnergyCo processes and procedures.
Interestingly the two transmission projects named in parliament as being important for meeting data centre demand are already allocated to be delivered by the network operator, Transgrid.
How these changes interact with the Energy and Climate Change Ministerial Council agreement on 28 July 2026
The ECMC agreed to mandate that data centres offset their electricity demand by investing in additional renewable generation located in the jurisdiction where the data centre is located, unless that jurisdiction opts out6.
The rules are set nationally but states and territories may add their own requirements on top, thereby making the national obligation the floor, not the ceiling.
The AEMC – the national electricity rule maker – recommended to Energy Ministers at the 28 July meeting four recommendations, designed to operate as a package7:
Surrender Renewable Electricity Guarantee of Origin certificates from new, additional generators to offset the power they use
Demonstrate demand is backed by new firm capacity
Register as market participants under the National Electricity Rules
Connection agreements that encourage demand shifting and co-location with generation.
Energy and Climate Change Ministerial Council welcomed the AEMC's advice and agreed to progress regulatory arrangements to mandate that data centres offset their electricity demand through new renewable generation, including via a guarantee of origin scheme.
Two design features should be noted with great interest.
First, AEMC identified an option for data centres to draw temporarily on existing renewables and make up the shortfall by surrendering certificates in later years.
Second, in its Detailed Policy Assessment the AEMC read ‘firming’ as technology-neutral, expressly including open-cycle gas turbines.
That second point is now contested. Following the 28 July meeting the Federal Energy Minister, Chris Bowen said the federal government would legislate to prevent dissenting jurisdictions – such as Queensland and Northern Territory - allowing large data centres to be powered by fossil fuels, using federal powers over AEMO and the AEMC to require connection only on terms consistent with the national framework8.
But the states can move much faster than the national process so there is likely to be a dislocation and unevenness across NEM jurisdictions as these matters of policy play out.
What this means for investors
Next milestones
September 2026: ECMC considers NER rule change requests, where the firming definition could be settled. NSW Parliament resumes debate on the bill.
October 2026: AEMC final determination on technical access standards for large inverter-based loads. This determination will apply to every data centre connection in the NEM.
Early 2027: Federal legislation to Parliament of Australia to fulfill Office of AI Standards mandate.
Not investment advice. This article uses public information only and its content is general in nature.
Legislative Assembly Hansard - 05 August 2026 - Proof
Ibid.
Ibid.
Ibid.
Ibid .
ECMC Communique 28 July 2026
Data centres to bring clean, firm energy, be flexible and pay their way, AEMC advises Ministers | AEMC
Chris Bowen threatens federal data centre override against Queensland and Northern Territory renewables policy