Data centres to get faster nod if they meet energy, grid and water needs

Data centres looking to set up in New South Wales will “need to pay their own way,” including bringing additional electricity and water, but in return will be granted an approval verdict within 75 days, the state government said.

The rules, detailed during a media conference in Sydney on Monday, made NSW the first of the states to give a formal public response to the Albanese government’s plans for the fast-growing data centre industry last month.

NSW already has 61 such centres in operation, with a further 19 already queued up in the state’s significant development pathway. Another 15 are lining up to join that track, ministers said. 

The urgency to set new rules comes as the sector is on track to make up as much as 11% of power demand – roughly equivalent to the proportion now taken up by the Tomago aluminium smelter – by 2030, energy minister Penny Sharpe told the conference. 

“That’s a challenge, but it’s also an opportunity for us to underpin greater renewable energy investment into the future,” Sharpe said.

Regulations determining energy use, including new network connections and the requirement for data centre developers to sign up new power purchase agreements, are contained in legislation that Sharpe has introduced to parliament.

The government will also mirror the federal and South Australia governments, setting up an Office of AI to coordinate different departments’ handling of artificial intelligence policies. That unit will sit within cabinet, “close to the centre of policy making”, treasurer Daniel Mookhey said.

“[W]e want data centers to help us pay for more renewable energy, so households pay less,” Mookhey told reporters. “[W]e need to make sure that the rules we set forth today are climate proof and are drought proof.”

The promise of a 75-day deadline for an approval decision compares with about a 100-day wait now.

“[I]t’s ultimately a question for them to set out whether or not they think their projects comply with these new rules, and we’ll assess them obviously on a case-by-case basis,” Mookhey said.

“[F]rom our perspective, we don’t consider these to be particularly cost onerous for data centre builders, and it shouldn’t be.

“But I think it’s fair and reasonable for the community to say that for these facilities that will be operating in some cases for many decades to come, that the people of New South Wales, as a premium destination, are entitled to the very best energy standards, the very best water standards, and the very strongest energy environmental protections available,” he said.

NSW and Victoria so far have attracted the lion’s share of existing and proposed data centre investment. The industry has grown much faster than regulators, in particular, had expected. 

The need to ensure the centres add to renewable energy supplies was a centrepiece of the federal government’s new plans. Queensland and the Northern Territory have stated their intention to meet the centres’ power supplies with other sources, particularly fossil gas, setting up a likely clash with Canberra.

The office of federal energy minister Chris Bowen did not have an immediate response to the NSW statement, instead highlighting comments he made to the National Press Club earlier this month.

“I appreciate states and territories working with us and the [Australian Energy Markets Commission] to implement these reforms,” Bowen said at the time. 

“States and territories will be free to add more rigorous requirements if they feel that is appropriate for their circumstances, but not to water them down.”

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