The emerging planning and environmental regulation challenge of data centres
The data centre industry in Australia is growing rapidly. Most recently, Anthropic announced its first Australian deal to use a data centre hub on Queensland’s Western Downs.
That growth presents an emerging challenge for planning and environmental regulation as data centres are not yet consistently addressed as a discrete land use in local planning schemes and require substantial reliable energy supply and significant cooling infrastructure.
As a result of the significant resources demands of data centres, governments are increasingly concerned that large data centres may impose costs on existing energy and water networks, with those costs ultimately borne by other consumers. In response, it appears likely that proponents will be expected to underwrite, fund or facilitate the additional generation, storage, network or water infrastructure required to support their projects. However, state and federal legislation is still in its infancy, with nothing currently in place in WA.
Australian Approach to Date
The Federal Government has recently closed the submission period for proposed federal data centre regulations. On 26 August 2026, National Cabinet agreed that large data centres have material energy, water and land-use impacts that require management through nationally consistent mandatory standards. While there had previously been sentiment for data centres to have self-sufficient renewable energy sources, it appears that state-generated fossil fuel energy will be permitted such as in Queensland..
The Federal Government has also published expectations for data centres and AI infrastructure developers, identifying five priorities:
advancing Australia’s national interest;
supporting the energy transition;
using water sustainably and responsibly;
investing in Australian skills and jobs; and
strengthening research, innovation and local capability.
New South Wales has been the first state in Australia to introduce a data centre-specific regulatory framework, through the NSW Data Centre Policy Framework and accompanying NSW Data Centre Guidelines (NSW Framework). The NSW Framework sets out various performance measures which are incentivised by a fast-tracked planning assessment. If a proponent meets the performance measures, the NSW Government is committed to a 75-day assessment timeframe.
The NSW Framework sets out performance measures under six principles, which are similar to the priorities identified by the Federal government:
apply world-class environmental and efficiency standards;
impose no net cost to consumers and communities;
fund additional supply of water and energy;
enhance local community infrastructure and amenity;
invest in future industries across supply chain; and
demonstrate a commitment to training and skills to support jobs.
The performance measures set out in the NSW Framework include requirements for water usage and the transition to renewable energy generation.
International Approach
International approaches to data centre regulation demonstrate a similar theme. Governments are seeking to maintain investment in digital infrastructure while ensuring that proponents manage network, resource and environmental impacts. In Ireland, new electricity connection requirements focus on generation and storage capacity. Singapore’s Green Data Centre Roadmap focuses on energy efficiency, additional capacity and operating standards suited to its climate.
Conclusion
It is clear that data centre growth is already occurring in Australia and that regulation is catching up. Given the approach of the NSW Framework, it is expected that any Federal legislation would link the growth of data centres with further support of renewables. Planning and environmental due diligence should form part of any proposed data centre project, particularly in Western Australia, where proponents must currently navigate planning and environmental legislation that is not specific to data centres.