New South Wales may need to rethink how it approves large data centres after a parliamentary inquiry found that existing planning rules do not adequately account for their combined impact on water, electricity and infrastructure.
The inquiry examined the rapid expansion of data centres across the state as demand for artificial intelligence and cloud computing continues to grow.
Its report found that facilities are often assessed individually, even though several large developments in the same area can place significant pressure on local resources.
The committee warned that current planning rules may underestimate future electricity demand and water requirements. It also raised concerns about the effect that clusters of data centres could have on communities and other industries competing for the same resources.
Despite those concerns, the committee stopped short of recommending a moratorium on new data centre approvals.
Instead, it called for a comprehensive strategy for managing the industry’s growth and better coordination between authorities involved in the approval process.
The committee voted 6-1 to remove recommendations calling for state and national moratoriums while the environmental and social effects of the industry are examined further.
The debate comes as Australia attempts to take advantage of the economic opportunities created by artificial intelligence.
Data centres are becoming increasingly important to the digital economy because they provide the computing infrastructure needed for cloud services, artificial intelligence and other online technologies.
However, their rapid expansion can require substantial amounts of electricity and, depending on the cooling systems used, water.
The issue is particularly sensitive in NSW, where communities have raised concerns about proposed developments.
The inquiry’s findings are likely to add pressure on governments and developers to demonstrate how new facilities will affect local infrastructure before projects receive approval.
The report does not call for the end of data centre development. Instead, it argues that governments need a clearer long-term framework for managing an industry that is expected to continue expanding as demand for AI services grows.
