while governments draft the rules
| Key Points |
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Software engineer Jack Tollefsen tends a community garden on Sydney's western fringe.
NEXTDC is building a large data centre campus down the road from his workplace.
Tollefsen has launched a petition against that project and others in suburban areas.[6]
The Australian Energy Market Operator (AEMO) forecasts that data centres will use nearly seven times as much electricity by 2035-36.
Water utilities, researchers and the Climate Council say the costs extend well beyond the power bill.[1][2]
AEMO counts about 165 data centres that consumed roughly 5 terawatt-hours of electricity in 2025-26. A terawatt-hour equals one billion kilowatt-hours.
That represents about 3% of consumption on the National Electricity Market (NEM), which supplies eastern and south-eastern Australia.[1]
AEMO's most likely scenario lifts that figure to about 34 terawatt-hours by 2035-36, or 13% of NEM consumption.
Developers have proposed 225 projects totalling 67 gigawatts, or 67 million kilowatts, of capacity.
Cancellations temper that pipeline, since developers abandoned 36% of the projects AEMO listed in 2025.[1]
AEMO expects business and large industrial users to stay bigger consumers than data centres in 2035-36.
Growth nonetheless runs fast, with Victorian data centre demand nearly doubling in a year, the Climate Council reports. Demand in New South Wales (NSW) rose 18%.[1][2]
The Climate Council's June report calculates that all proposed projects together would draw more than 21 gigawatts at peak. That equals over seven times the capacity of Eraring, Australia's biggest coal-fired power station.
One proposed 1.2-gigawatt facility at Mamre Road in NSW would have a maximum capacity 25% above the Tomago Aluminium Smelter.[2]
Climate pollution depends on what generates the extra electricity. The Climate Council finds that unchecked demand would prolong reliance on coal and gas. Its analysis shows the national grid could emit 14% more pollution in 2035 than it otherwise would.[2]
The Climate Council projects that gas-fuelled growth would raise wholesale prices by up to 26% in NSW by 2035. Victorian prices would rise by up to 23%. Matching new demand with additional renewables and storage would almost entirely avoid those increases.[2]
The Clean Energy Finance Corporation estimates that data centres without new renewables would add 5.86 million tonnes of emissions yearly. A Greenpeace Australia report by analyst Ketan Joshi cites that 2035 estimate. Data Centres Australia, the industry body, rejects the report's claims about scale and causation.[7]
Coal closures raise the stakes. The Climate Council warns that fossil-fuelled supply would delay coal station retirements and deepen reliance on expensive gas. Renewables and storage now supply about 45% of electricity on the main grid, nearly double their share six years ago.[2]
Servers convert nearly all their electricity into heat. University of Melbourne researcher Reza Hosseini says evaporative cooling, which evaporates water to shed heat, costs least in Australia. That evaporated water leaves the system and needs replacing.[3]
Industry-commissioned analysis puts direct data centre water use at about 5.5 billion litres a year, or 0.04% of national use. Industry forecasts show that figure more than tripling to around 17 billion litres by 2030. Farming alone accounts for roughly two-thirds of the water Australia uses.[3]
The pressure concentrates where data centres cluster, in outer suburbs of Sydney and Melbourne with stretched drinking-water networks. Sydney Water has fielded applications for single facilities needing up to 40 million litres a day. It told a NSW parliamentary inquiry that proposed facilities with water-intensive cooling could demand 250 million litres daily by 2035.[3]
Forecasts for Sydney diverge sharply. The data centre sector estimates 1.9% of Sydney's supply by 2030, according to the Water Services Association of Australia. Sydney Water estimates 15 to 20% by 2035, building its figure from market applications and discounting unlikely projects.[8]
XDI, a physical climate risk analysis company, examined almost 2,600 planned data centres worldwide. It found 154, or about 6%, already vulnerable to physical damage or disruption from climate hazards. The analysis covered 11 hazards, including flooding, bushfire, tropical cyclones and extreme heat.[4]
Australia ranks 22nd globally for that risk but faces one of the steepest projected increases over time. XDI director Karl Mallon says rising temperatures strain cooling systems. He warns that electricity, telecommunications and cooling water supplies may prove more vulnerable than the data centres themselves.[4]
Andrew Pitman and colleagues analysed existing, under-construction and planned data centres in Sydney. They found that the facilities intensify heatwaves, particularly at night. The study remains a preprint, a paper that has yet to complete peer review.[5]
The affected area, the heat intensity and the number of people exposed depend on facility size and cooling technology. The authors recommend siting large data centres outside the city. They note that this approach could support regional development.[5]
The federal government plans to legislate national standards by early 2027. It says large data centres must underwrite new renewables, cover connection costs, use water efficiently and choose suitable sites. State and territory governments keep responsibility for local planning and approvals.[6]
ABC analysis found 27 approved but unbuilt data centres totalling at least 3.38 gigawatts. This new generation will run significantly larger and more power-hungry than existing facilities. Prime Minister Anthony Albanese says the rules will cover future proposals only, since retrofitting is impractical.[6]
Greens senator Sarah Hanson-Young wants a moratorium, or temporary halt, on new approvals until standards exist. She argues that rules without retrospective force, meaning power to reach approved projects, have little value. Data Centres Australia says members will keep meeting government expectations until the new rules take effect.[6]
States remain divided. Queensland and the Northern Territory rejected parts of the framework in July, including legislated renewable requirements. In August, Energy Minister Chris Bowen said Commonwealth laws would stop states approving large fossil-fuelled data centres.[9][10]
Australia's data centre boom is outrunning the rulebook meant to govern it. AEMO forecasts a nearly sevenfold rise in electricity use within a decade, and proposals keep multiplying. Whether that demand raises or lowers pollution depends on the power supply behind it.
The evidence reveals gaps in accountability. Approved projects sit outside the coming standards. Water forecasts rely on industry or utility estimates, and heat research awaits peer review.
Credible oversight needs enforceable rules, public reporting and clear accounting of who bears the costs. Governments, regulators and developers hold those levers. Neighbours of western Sydney's new campuses already live with the results.
1. AEMO, 2026 ESOO Data Centre Forecasting Overview. AEMO's explainer sets out current data centre consumption, the 2035-36 forecast, the project pipeline and cancellation rates.
2. Climate Council, Clouded Future: Managing the Risks of the Data Centre Boom. The June 2026 report models price, emissions and water risks from unmanaged data centre growth and recommends enforceable rules.
3. M. Reza Hosseini, What AI Data Centres Really Mean for Australia's Water Supply (University of Melbourne, Pursuit). A University of Melbourne researcher tests viral water claims against utility, industry and policy evidence.
4. XDI, Data Centres Being Planned in Areas Vulnerable to Extreme Weather Events. XDI summarises its global analysis of physical climate risk to almost 2,600 planned data centres.
5. Pitman et al., Large Data Centres in Cities Risk Suburban Heating (Research Square preprint). This preprint, which has yet to complete peer review, reports that Sydney data centres intensify night-time heatwaves.
6. ABC News, The Bigger, Hungrier AI Data Centres Set to Escape Looming Water and Power Restrictions. ABC analysis shows dozens of approved projects will fall outside the proposed national standards.
7. Information Age (ACS), 'Energy Vampires': Calls to Pause Data Centre Frenzy. The article reports the Greenpeace analysis, the Clean Energy Finance Corporation estimate and the industry rebuttal.
8. Water Services Association of Australia, Data Centres and Water in Australia. The peak water body compares industry and Sydney Water forecasts and explains how utilities treat speculative demand.
9. ABC News, Renewables, Nuclear, Gas? Data Centre Boom Energises Political Debate. ABC reports that Queensland and the Northern Territory rejected parts of the national framework.
10. PV Tech, Australia Sets National Data Centre Standard, Bars State Waivers. The report covers Chris Bowen's warning that Commonwealth laws will block fossil-fuelled data centre approvals.
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