NSW Inquiry into Data Centres
NSW Legislative Council, Public Accountability and Works Committee
Key Resources
Background
The NSW Legislative Council's Public Accountability and Works Committee is inquiring into data centres in New South Wales, covering energy and water use, environmental impacts, governance, and economic outcomes.
AI data centres are expanding rapidly. US technology companies are investing over USD $650 billion in AI infrastructure in 2026 alone, and Australia was the second-largest destination for data centre investment in 2024. NSW is a primary destination for this investment.
Our submission
The submission argues the key question for this inquiry is not whether to treat data centre growth as an environmental problem to be contained, but what conditions make it compatible with NSW's energy, water, and community objectives — and how to ensure those conditions are met. It responds to terms of reference (c), (d), (g), and (h).
On energy, the submission acknowledges that uncontrolled data centre growth could jeopardise NSW's 2035 emissions target, but argues there are actions that could address this. Behind-the-meter solutions and microgrids can bypass grid challenges. Where operators connect to the grid, they can be required to cover upgrade costs and offset consumer price increases. These are conditions major AI companies have already committed to in the US.
On water, widely cited figures significantly overstate data centre water use. Per-prompt estimates have been corrected from a bottle of water to around 2 millilitres, and a bestselling book's data centre water figure was overstated by a factor of approximately 1,000. Direct water use can be addressed through conditions requiring closed-loop cooling technologies, which Microsoft has deployed in all new data centres since August 2024 and which Anthropic has committed to in Australia. Placing requirements on clean energy sourcing would help address indirect water usage.
On governance, large-scale AI data centres warrant coverage under the Security of Critical Infrastructure Act 2018. An independent review of the SOCI Act recently recommended expanding coverage to include AI infrastructure and services. The submission also notes that unworkable conditions don't prevent data centre development—they redirect it to Gulf states or the US, where Australia has no regulatory influence.
The submission recommends NSW align its approach with the Australian Government's Expectations of Data Centres and AI Infrastructure Developers, which provide a framework for ensuring investment serves Australian interests.