As AI demand surges, Australia outlines sustainability expectations for data centre expansion

Australia’s booming digital appetite is pushing a rapid build-out of data centres, and the federal government is moving to set guardrails. This week it outlined five national expectations for companies seeking to build or expand facilities, aiming to match the pace of investment with sustainability and local benefits.

Data centres are the backbone of everything from web searches to AI chatbot queries. A request travels from a device through fibre to a facility filled with server racks and high-powered processing chips, where it is handled and sent back in milliseconds.

Bronwyn Cumbo, a lecturer in Sustainable and Inclusive AI Futures at the University of Technology Sydney, said most modern services—from banking and health to social media, public transport and streaming—depend on these centres to store and process data. Australia already hosts more than 200 data centres and has the world’s second-largest pipeline of new construction after the United States.

Late last year, the government launched a national artificial intelligence plan; the new expectations build on that agenda. They ask proponents to prioritise Australia’s national interest; support the energy transition; use water sustainably and responsibly; invest in Australian skills and jobs; and strengthen research, innovation and local capability.

While not legally binding, the expectations are described as important for getting new investments approved. Industry and Innovation Minister Tim Ayres said Australia must avoid a “race to the bottom,” particularly on electricity and water use.

He said the government would continue working through the issues with state and territory counterparts, including, led by Minister Bowen, with the energy ministers, calling the data centre expectations an “important overlay” on that work and framing the sector as a major opportunity for growth, employment, competitiveness and resilience.

The environmental footprint of AI is sharpening the debate. In 2024, the International Energy Agency estimated a single ChatGPT query requires 2.9 watt-hours—about 10 times the energy of a typical Google search. One illustrative scenario suggested that if 100,000 people each generated a five-minute AI video using about 3.4 million joules of energy, the total would be enough to power 5,000 to 6,000 Australian households for a day.

Some experts argue Australia should build more capacity. Nigel Phair, a professor of cyber security at Monash University, said the country needs additional data centres to meet AI compute demands and to participate in the global ecosystem. “We’ve got a lot of land, we’ve got a lot of renewable energy,” he said, adding Australia should encourage other countries to colocate their data here.

Industry leaders also warn against relying solely on overseas infrastructure. Belinda Dennett, CEO of Data Centres Australia, said failing to invest risks becoming an importer of foreign technology and a “client state” of foreign providers. She said infrastructure is a critical part of the AI equation and argued Australia has the elements to be a strong market.

Questions remain about how the government’s expectations will be applied in practice. For now, officials say the framework will guide discussions with states and territories as Australia balances AI-driven growth with energy, water and workforce considerations.