Australia has found itself in a unique position as a critical player in the development of data centre construction, but what does this mean for Australia’s environment and people?
Data centres and their rapid development have dominated global news coverage much of the last year, and Australia is set to find greater footing in the race to construct hyperscale centres. These centres power our modern lives; storing cloud data, housing the internet, which critically includes the data that supports ever-growing artificial intelligence models. By Australia allowing the construction of data centres, it can bring many wealthy technology companies to our shores and boost the local economy, but the environmental impact of these centres - and cultural and social implications - has raised levels of concern for Australia’s sustainable future.
On a global scale, the United States dominates hyper-scale data centre infrastructure with over 5,426 data centres as of June 2026. This can be attributed in part to federal fast-tracking to secure the U.S.’s dominance in the sector, alongside significant private sector investment as technology developers rapidly create new programs. While the U.S. will likely remain the dominant region, as its unparalleled early-stage development has firmly cemented its infrastructure, global expansion has become increasingly attractive. Rather than fighting to compete with high land rates and demands on the energy grid, investors are looking to new countries to house the data that AI systems rely on.
Australia’s geography provides data centre developers with a unique - albeit qualified - solution to the U.S.’s ongoing challenges. As a nation, we have vast quantities of land available for giant centres, and an ability to construct renewable and non-renewable energy sources to boost power grids for successful operation. Australia’s position is enticing to many developers, but questions are being raised about the sustainability of constructing and maintaining the centres.
Current Projections & Emissions
Australia currently houses 314 data centres, with the majority in Victoria and New South Wales. This makes us the sixth biggest participant in the world, behind nations like the United Kingdom, France, and China. According to a bulletin from Westpac in May 2026, the influx of spending on data centres in Australia could total $155 billion by 2035.
It’s no secret that data centres use a mammoth amount of resources for their operations. Current projections tip total energy consumption at over 4GW by 2035 (1GW = 1 billion watts), but the Australian Energy Market Operator (AEMO) forecasts that this could eventuate to nearly 6GW if demand continues to soar. The majority of the planned proposals, and the reason prospectors so value Australia’s landscape, is the amount of land available on the “urban fringe”; areas already primed with connectivity, power and natural resources, surrounded by skilled workers. This is a major primary reason why Sydney and Melbourne areas are becoming data centre hotspots.
Because the demand on existing energy sites will continue to rapidly increase with each new construction, the Australian government has outlined clear expectations for new proposals. These include ensuring that new sites secure new and additional clean energy sources, prioritise sustainable water usage, and give back to Australia’s tech landscape. Concrete legislation is proposed to come into effect in early 2027. However, these expectations are not enforceable laws, and earlier this month Queensland’s energy minister confirmed the state wouldn’t be following these guidelines.
Greenpeace Australia Pacific outlined in a May 2026 report that Australia’s ‘frenzied’ acceptance of data centres and rollouts will derail the country’s current energy transition. The organisation cites failure to effectively offset energy usage with renewables and ‘greenwashing’ of data centre offset plans as detrimental to Australian emissions. They evidence how projects backed partially by fossil fuel reserves can cause dramatic increases in carbon emissions, providing the example that one major gas-fired project proposal could wipe out the entirety of NSW’s 2028 projected emissions cuts. However, according to The Sydney Morning Herald, energy giants including Engie and Aula Energy claim the rapid push for renewables to power the centres could bring a faster wave towards Australia’s overall green energy goals.
Greenpeace’s recommended action from the government is an urgent moratorium on all data centre proposals until concrete legislation that goes beyond the current expectations can be introduced.
A moratorium has been utilised against data centre development before in Singapore, due to the critical lack of energy and free land for development. Through strict legislative changes and a robust vetting process, a three-year pause on data centres has given way to strict enforcement of operations, including 100% renewable energy and a power usage efficiency of 1.3. (Power usage efficiency is a measurement tool that indicates how efficient a data centre is. 1.0 is the best possible score).
So, with Australia beginning to lay the foundations for ‘green’ data centres, what does the data for power and energy usage currently tell us? The answer is confusing. Much of the critical data that the Australian Bureau of Statistics can provide loops data centres into a broader category, leaving figures like energy usage vague and almost unusable in creating an accurate understanding of consumption. Further, data on water usage only measures water cooling systems, which doesn’t account for the vast quantities used in fossil fuel production to power them.
Other pollutants from data centres are not automatically considered when looking at construction. Noise pollution can impact those located in close vicinity to the centre, with areas in Virginia recording between 40-59 decibels in urban neighbourhoods. This can impact sleep, recreation and overall mental well-being. Further, data centres can produce localised heat spikes similar to the urban heat island effect. Because of the continuously running technology, the heat from data centres can cause, on average, a +2°C change to the surrounding 10km. With these impacts in mind, Australia should continue to strive towards sustainable and safe practices when assessing proposed data centres.
What Does the Future Hold?
The future of data centres in Australia will be heavily shaped by evolving applications of renewable technologies and further innovation.
Investors have now begun to look beyond urban fringes for hyperscale data centres, looking towards the expanses of the outback in both Western Australia and the Northern Territory, to house data sites and the renewable energy plants they run on. In WA, many leading AI and technology companies have developed plans to build data centres in the Pilbara and Kimberly regions, alongside Fortescue Metals Group’s proposal to build an almost 2.3 GW renewable grid. According to the Australian Financial Review, these prospectors are attracted by the proximity to sub-sea cable connections and reduced numbers of impacted people, often meaning fewer changes to proposals. The NT has similar proposals, with Energy North's “Project Ares” proposing to construct almost 7,000 hectares of solar infrastructure to power a 1GW centre. The company highlights a closed-loop cooling system for water that would significantly reduce water usage, however the first yearly usage estimates total 4 gigalitres. Both of these projects demonstrate a clear ability for data centres to adhere to Australia’s expectations and the possibility for a cleaner path forward.
Innovation in cooling technologies may also dramatically reduce water consumption rates, thanks to companies developing new cooling methods. DUG Technologies, an Australian-run technology startup, created an oil-based liquid immersion for cooling servers, allowing systems to run at hotter temperatures and with significantly less water. The technology has led to energy savings of up to 50%, and water savings of 25%. While the company admits that its small operation size in comparison to sector leaders makes developing and sharing this technology difficult, the innovation displays a positive outlook on the future of data centre water consumption.
The growth of AI is given, and it will be interesting to see how public and governmental pressures impact its pace and contributions to the economy and environment. Major technology companies will continue to develop data centres, but promised legislation may soften the blow to our environment through enforcing sustainable water usage and supporting the renewable energy transition. In the interim, data centres will continue to follow our ‘expectations’, in the hope that the social contract is enough to incentivise the proper use of renewable energy to offset, and water efficiency to lessen the strain on our nation.
Article by Chiara Dakin
Image from CanvaPro