Australia's data centre boom raises fears over power and water supplies

Australia has rapidly become one of the world's most attractive destinations for data centre construction, drawn by cheap clean energy, gas reserves and available land. The country currently hosts 162 data centres, with 90 more planned and roughly A$155bn in investment lined up. One of the world's largest data centres is proposed for western Sydney, while the biggest facility in the Southern Hemisphere is already under construction in Marsden Park.

The boom has been driven largely by the explosion of AI interest since ChatGPT's 2022 launch. Industry figures argue that without local data centre infrastructure, Australia risks becoming merely a user of technology built elsewhere rather than a developer of its own AI industry. Some economists say the investment surge has helped the country avoid recession in recent years.

But energy and environmental experts warn Australia lacks the capacity to meet the massive power and water demands these facilities require. Without significant new renewable generation, electricity prices in New South Wales could rise 26% by 2035, according to one estimate. There are concerns the boom could spur new gas and coal power development, since data centres need uninterrupted power that wind and solar alone cannot reliably provide. The facilities also consume vast amounts of water for cooling — some up to 40 million litres a day — and could account for up to a quarter of Sydney's drinking water supply by 2035.

In July, Prime Minister Anthony Albanese announced new legal requirements for large data centres to secure their own power supplies, limit water use and fund extra water infrastructure. However, the rules, due to take effect in 2027, will apply only to new proposals, not existing or under-construction projects.

In the Sydney suburb of Lane Cove, residents have complained about constant noise from nearby facilities and fear further construction close to homes and a primary school. Local officials and environmental groups are calling for a pause on new approvals. Concerns have also been raised about businesses being forced to relocate, threatening local jobs, while critics question what tangible value some AI applications actually provide in return for the resources consumed.