Data centre operators should be required to prove they support renewable energy and publicly report their performance before they are allowed to build in Australia.

The call comes from Torrens University Australia professor of artificial intelligence Seyedali Mirjalili, as a widening divide emerges over how the country should manage a surge in data centre investment.

It’s been a busy month for Australia’s data centre policy, with a clear rift emerging between those looking to speed up approvals and position the country as a hub for the digital infrastructure, and other groups concerned about their environmental impact and the proliferation of big tech firms locally.

Late last week, the New South Wales government announced that it would be fast-tracking the potential approval of more than $50 billion in data centre projects and opened consultation on a plan to ensure these are sustainable and in the public’s interest.

The federal government also last week unveiled its data centre expectations, aiming to ensure that any new projects are aligned with national interests.

It was also revealed that Google had hit pause on a plan to develop a $20 billion data centre and AI hub in Australia due to concerns it could face higher taxes across its Australian operations.

‘Competing for already constrained infrastructures’

Mirjalili said governments should require data centre developers to demonstrate clear support for renewable energy as part of the approvals process.

“If a project adds major new demand to the grid, it should also help add new clean supply storage and flexibility," he told Information Age.

“Otherwise, data centres may end up competing for already constrained infrastructures instead of helping expand it.

“This is why I think governments should push for a stronger link between project approval and demonstrated support for new renewable generation, storage and grid resilience.

“That is the best way to align data centre growth with broader national energy goals.”

He also called for greater transparency around how projects perform against these goals.

“If these projects are meant to support the economy and the energy transition, the public should be able to see whether that is really happening,” he said.

“There should be regular reporting on electricity demand, water use, efficiency, local impacts and infrastructure contributions.

“Without that, good principles may still remain weak in practice.”

$50bn in fast-tracked projects

The NSW government has approved 15 data centre projects to progress through the Investment Delivery Authority, which is designed to accelerate approvals.

Together, these projects are worth $51.9 billion.

At the same time, proposals worth $40.7 billion were rejected from entering the fast-track process because they were deemed “premature or overly speculative”.

Mirjalilli said it’s important that a faster process does not mean weaker scrutiny.

“The scale of investment is clearly significant…speed should not come at the expense of proper assessment,” he said.

“Large data centre projects can have major energy, water, land-use and community effects. So the planning process still needs to remain careful and credible.

“It can be a good step if it improves coordination and investment certainty.

“It will be a poor step if it weakens scrutiny or shifts costs and risks onto the public.”

There are already 90 data centres in NSW, with investment in the sector growing by an average of 65 per cent year-on-year over the past three years.

Data centres now account for more than 10 per cent of all non-residential building investment in the state.

Consultation

The state government also released the NSW Data Centre Consultation Paper, outlining the principles-based approach it aims to use to balance the opportunities and challenges presented by data centres.

These principles include requiring operators to fund their own infrastructure so costs are not passed on to households, ensuring energy efficiency and sustainability, and supporting the broader technology ecosystem.

Mirjalili said the consultation is a good start, but urged the state government to go further than just principles.

“The next step should be to turn these principles into clear standards, measurable benchmarks and enforceable conditions,” he said.

The consultation paper has been welcomed by Data Centres Australia as a “constructive shift”, but the organisation said it is concerned that any new framework may slow down the approval process.

“We are in a global race for AI infrastructure,” Data Centres Australia CEO Belinda Dennett said.

“Asian markets including India, Japan and Malaysia are competing aggressively for the same capital, offering faster approvals and clearer investment signals.

“Any new framework must be accompanied by a faster, more streamlined approval process.

“Adding new requirements on top of existing delays will not deliver the outcomes the government is seeking; it will redirect investment to other markets.”

The federal government’s new ‘expectations’ have also drawn criticism from multiple sides. Operators have raised concerns about the exclusion of on-premise facilities, while environmental groups argue the measures should be made binding.