Australia Outlines New Net Zero, Water Requirements for Data Centre Growth

New data centres will need to support the net zero transition while also maintain sustainable use of water resources, according to new requirements from the Australian federal government.

The release of the “Expectations of data centres and AI infrastructure developers” comes amid ongoing questions about the sustainability of building more energy and water hungry data centres in Australia, particularly the ongoing explosion of artificial intelligence (AI) use, which needs intense computational resources.

Minister for Industry Tim Ayres says AI has the capacity to help address Australia’s national challenges.

“Australia has a significant number of national challenges to solve—and AI, data centre investment and advanced industrial and technological capability can help us get there,” Ayres said in a statement.

“Securing this infrastructure onshore strengthens our security, supports our startups and researchers and ensures Australian data benefits Australians—not offshore jurisdictions.

The Labor government has highlighted five expectations for new data centres:

1. They must prioritise the national interest and “benefit of the Australian economy, people and their local communities.;”
2. Support the energy transition and cooperate to create new “clean energy” generation;
3. Use water resources sustainably;
4. Invest in local jobs; and
5. Support local start-ups.

Australia currently hosts more than 200 data centres, and demand for new facilities is growing. In December 2025, Australia’s utility industry warned the country’s water supply may not cope with data centre growth.

Developers are now reportedly seeking between 5-40 million litres of water per day to cool their facilities, which equates to 80,000 households of water at the upper end.

Abigail Boyd, Greens MP, said this trend could see “20 percent of Sydney Water’s total usage being consumed by data centres” by 2035.

Opposition Asks Whether Country Has Enough Baseload Energy

During Question Time on Mar. 23, Shadow Industry Minister Andrew Hastie cast doubt on whether the Labor government’s energy plan could support more data centres.

“What the government is saying here is you have to invest in your renewables, but everybody can’t power AI centres off renewables alone, you need baseload power from coal or gas or nuclear,” Hastie told Parliament.

The MP argued for more investment in coal and gas baseload power generation that can sustain energy grids continuously.

Meanwhile, Assistant Minister for the Digital Economy Andrew Charlton responded to questions on why the plan lacks renewable or water resource targets.

“Data centres in different locations, with different requirements and specifications, will have very different needs. So a single metric across the breadth of data centres wouldn’t be appropriate,” Charlton said.

Instead, the government is working with states to develop standards for different circumstances, with the expectation that data centres will “meet all new power demand from incremental renewable sources.”