AGL (ASX: AGL) Targets AI Power Surge as Data Centre Demand Reshapes Energy Market

Key Highlights

• AGL raises the lower end of FY26 earnings guidance after stronger operational performance
• Company says AI-driven data centre demand could reshape Australia’s electricity market
• Underlying EBITDA guidance lifted to between $2.06 billion and $2.18 billion
• AGL expands battery and gas “firming” strategy as coal exits accelerate

AGL Energy (ASX: AGL) is positioning itself at the centre of Australia’s next major electricity demand wave, with the company signalling that artificial intelligence and data centres could fundamentally reshape the country’s energy market over the coming decade.

The utility giant upgraded the lower end of its FY26 earnings guidance on Tuesday after stronger operational performance across its generation fleet, while also outlining an increasingly aggressive strategy focused on batteries, gas peakers and high-reliability power infrastructure.

Shares in AGL Energy (ASX: AGL) were trading 0.74% higher at $9.50 by early Wednesday afternoon.

The update comes as global energy markets remain volatile amid ongoing fuel supply pressures and rising geopolitical tensions, while the rapid expansion of artificial intelligence infrastructure is beginning to place fresh pressure on electricity grids worldwide.

Source: MarketIndex 

The AI electricity boom

At the centre of AGL’s outlook is an emerging demand surge from data centres.

Chief Executive Officer Damien Nicks said electricity consumption from data centres across the National Electricity Market currently sits at around 5 terawatt hours annually, but that figure could rise dramatically in coming years.

According to AGL, consumption could eventually climb to 34 terawatt hours if all proposed developments proceed.

That would represent one of the largest structural shifts in Australian electricity demand in decades.

The rapid expansion of AI computing has already triggered similar power concerns globally. In the United States, major technology groups including Microsoft, Amazon and Google have begun securing direct energy agreements and investing heavily in generation capacity as AI workloads place growing pressure on power systems.

AGL believes Australia could soon face a similar dynamic.

“Data centre demand has the potential to significantly exceed current market forecasts,” the company noted, referencing Australian Energy Market Operator projections.

From coal giant to “flexible” energy provider

AGL’s latest update also reflects a broader strategic transition underway inside the business.

Historically viewed as one of Australia’s largest coal-heavy utilities, the company is increasingly repositioning itself around what management calls “flexible generation” assets, infrastructure capable of responding quickly during periods of peak demand or renewable energy shortfalls.

That includes large-scale batteries, gas peaking plants and fast-response generation systems.

The company said its portfolio achieved a realised price of $84 per megawatt hour, comfortably above the broader market average of $71/MWh.

AGL expects that premium to improve further once the Liddell and Tomago battery projects become fully operational. Each battery system will add 500MW of capacity to the network.

The company said these assets are designed to capture pricing opportunities during periods of grid stress, particularly when solar generation fades in the evening while electricity demand remains elevated.

That strategy is becoming increasingly important as ageing coal plants progressively exit the grid.

Guidance lifted amid stronger performance

AGL narrowed and upgraded its FY26 outlook following stronger operational execution.

Underlying EBITDA guidance now sits between $2.06 billion and $2.18 billion, with the lower end lifted by $40 million.

Underlying net profit after tax guidance was also upgraded to between $610 million and $680 million.

The company reaffirmed its intention to continue paying fully franked dividends during FY26.

Operationally, fleet availability improved to 83.2%, up 3.1% from the previous half.

AGL highlighted the performance of the Bayswater power station, which achieved record quarterly availability of 98.6%.

Meanwhile, approximately $2 billion worth of energy projects are currently underway across the business.

The company also expects to receive around $750 million from the sale of its interest in Tilt Renewables by the end of May.

Western Australia expansion gathers pace

Beyond the east coast market, AGL is also expanding its footprint in Western Australia through Perth Energy.

One of the key projects is the proposed K2 gas peaker development, a 220MW facility targeting post-tax ungeared returns above 8%.

AGL estimates the project could generate annual EBITDA of between $50 million and $70 million over its first decade of operation.

The company argues that Western Australia faces a widening supply challenge as coal generation exits the market.

AGL estimates the state could face a 2.1GW capacity gap by 2033, creating opportunities for new gas, battery and renewable infrastructure.

Fuel crisis warning remains in focus

Despite the more optimistic earnings outlook, management also acknowledged the difficult operating backdrop facing global energy markets.

AGL said it is navigating what it described as a “global fuel crisis” and has secured diesel storage near capacity to ensure operational resilience over the next three months.

The warning comes as fuel supply chains remain vulnerable to geopolitical disruptions and shipping bottlenecks.

Nicks also cautioned that FY27 could face softer wholesale electricity prices and weaker market conditions following the recent period of elevated pricing.

The bigger picture

AGL’s latest update highlights how rapidly the energy conversation is changing.

Just a few years ago, the market focus centred largely on coal closures and renewable investment targets. Today, AI infrastructure, data centres and grid reliability are becoming equally important themes.

The rise of artificial intelligence is no longer just a technology story. It is increasingly becoming an electricity story.

AGL is betting that owning flexible generation assets during that transition could place the company in a stronger position as Australia’s energy system becomes more volatile, more digital and significantly more power hungry.