Hot weather and hungry datacentres lifted Australia's energy demand to record highs in the first quarter of 2026, but batteries helped quell prices, according to the Australian Energy Market Operator (Aemo).
Record Electricity Demand
Electricity demand from households, business and industry reached record levels of 25GW in Q1 2026, an increase of 1.2% compared with the same quarter last year. Across the national grid, this growth was offset by record output from rooftop solar. However, in New South Wales, where datacentre demand grew 18% in one year, grid electricity demand increased by 1.8%, despite the rise in rooftop solar. Previous Aemo forecasts have suggested datacentre power demand could triple in five years, exceeding the energy used by electric vehicles by 2030.
Renewable Energy Milestone
Across the national electricity market, which supplies the eastern states and South Australia, renewable energy provided 46.5% of all generation – a new high for the first three months of the year. This milestone was driven by increased solar and wind capacity, as well as favourable weather conditions.
Impact of Batteries
Batteries more than tripled their daytime-to-evening energy shifting, enabled by 4,445MW of large-scale battery capacity added during the past 12 months, more than doubling total installed capacity. Violette Mouchaileh, Aemo's executive general manager of policy, said this significant increase in large-scale and household battery capacity was changing the way electricity was produced, consumed and priced across the day. "Grid-scale batteries are increasingly absorbing excess renewable energy during the day and shifting it into the market during evening peaks, helping moderate prices during high-demand periods." By reducing reliance on gas and hydro at peak times, batteries also contributed to lower average wholesale electricity prices, down 12% on Q1 2025.
Gas and Coal Decline
Gas generation was the lowest for any quarter since 1999 – dating almost back to the beginning of the national electricity market. Gas generation was down 24% on the same quarter last year. Coal-fired generation also fell. Dr Dylan McConnell, an energy systems researcher at the University of New South Wales, said batteries were "one of the bright spots of the energy transition at the moment". "We've seen a lot of capacity come online in the last 12 months," he said. "We're now seeing the impact of that, with it significantly contributing to peak demand in the evening now, and displacing gas."
Heatwaves and Regional Demand
Grid demand grew in Victoria too, off the back of a near doubling in datacentre demand. The state also set a new record for all-time maximum power demand on 27 January, when temperatures topped 43C in parts of Melbourne amid an extreme heatwave. Two extreme heatwaves in January led to higher cooling requirements in most cities, especially in Adelaide, where demand for air conditioning more than doubled 2025 levels.
