Source: The Conversation (Au and NZ)
Australia’s pipeline of huge data centre projects has raised questions about how much energy and water these giant server farms will use.
These questions aren’t simple to answer because we don’t have the data.
We can’t check water or energy use for individual facilities or inspect national data centre statistics and no operator is obliged to disclose these figures.
That may change. Last month, the National Cabinet agreed to develop mandatory national standards for large data centres, covering energy, water and land use. The legislation is due early next year.
No detail is available, and little has been said about their lifetime environmental footprints, from land clearing to noise issues to electronic waste to greenhouse gas emissions. These must be counted too.
The fastest way to settle arguments about the environmental impact of the data centre boom is to collect and publish the data.
Data centres have existed for decades. But something has changed, and this essential infrastructure is now at the centre of a major policy debate.
This article is part of The Conversation’s series on data centres – what they are, why we need them, and why they’re suddenly so controversial.
Hungry for power
In 2020, data centres were estimated to use about 1.5% of the world’s electricity. But since 2022, the artificial intelligence boom has led to rapid growth.
Australia’s 165 operating data centres use an estimated 3% of the power from the National Electricity Market, Australia’s largest grid.
By the mid 2030s, the Australian Energy Market Operator predicts this will reach roughly 13%. This would put them on par with aluminium smelters.
Where will the water come from?
Water is much harder to quantify. My rough estimate suggests current national water use is a fraction of 1%, tiny compared to agriculture.
It’s not the national figure that matters, but where, when and how much water is taken.
A new data centre drawing 100 megalitres of water annually from a rural catchment may not matter over a wet winter. In a drought it might.
Some centres are proposed for hot, dry areas where water is already a concern, such as Bundey and Tailem Bend in South Australia. Their water use will depend on the cooling technology used.
At most data centres, only the operator has the data to calculate water use. They are not currently required to disclose use. The water utility sees a connection, not what happens inside the fence. Regulators could look, but it seems nobody has asked them to.
Sydney’s data centres currently draw about 3.5 billion litres a year, less than 1% of the city’s water supply. But this could rise to 25% within a decade, according to Sydney Water estimates.
By comparison, industry modelling suggests a figure of 2% by 2030.
This tenfold difference in forecasts for the same city is due to the fact much has to be assumed given the lack of data.
Mitchell Costello, CC BY-NC-ND
Trade-offs and complexities abound
If a data centre runs on renewables and uses the same water in a closed loop or new direct-to-chip cooling, the impact will be much smaller than using evaporative cooling, where much water is lost.
Similarly, power drawn from fossil-fuel dominated grids means water is used indirectly, as coal and gas plants use lots of water – especially compared to renewables.
The trade-off is direct: less water for cooling usually means more electricity.
The electricity used ends up as heat. Field measurements show downwind air temperatures average 0.7 to 0.9°C warmer.
While energy efficiency is improving and advanced liquid cooling can cut water use by up to 50%, this isn’t a full solution. Australia could build giant water-efficient data centres and still end up with climbing water use.
GoAerials/Getty
Lessons from abroad
In Ireland, data centres use 23% of electricity, close to all households combined (28%). But data centre demand is rising fast, jumping 10% last year – while household demand rose 2%. We know this because Ireland’s statistical office measures it. Ireland measures. Australia estimates.
Ireland’s transparency lets policymakers make hard decisions such as limiting new grid connections and requiring the use of renewables to meet 80% of demand.
The main lesson from the United States is that the most intense impact is often local. Communities chosen to host new data centres often push back hard based on issues around noise, energy and water use, and visual impact. Backlash against new data centres is becoming intense in many areas – and bridges political divides.
In Virginia, the constant hum of cooling fans drove local authorities to rewrite zoning rules and reduce noise limits.
Planning for growth
At a national scale, today’s data centres have modest environmental costs and potentially large economic benefits.
But we don’t know what this looks like when translated to local impacts.
The real issue is what’s in the pipeline. Right now, 225 data centres are proposed or under development. If all are approved, this would represent 67 gigawatts of new power demand – a massive jump on the 2.2 gigawatts currently operating.
Some of these projects won’t get up. Over a third of the planned projects listed in 2025 were cancelled. But some will be built. Because company disclosures are voluntary, selective and unaudited, they cannot be compared with each other or checked.
As a result, anxiety is filling the space where data should be.
What should Australia do?
Ideally, new data centres would draw power from new renewables with minimal indirect water use.
At a federal level, authorities want large data centres to source their own clean power. But Queensland and the Northern Territory want to use gas. This issue is yet to be resolved.
For water, maximising efficiency is the mantra. While efficiency is good, it is not enough. Water is extracted, not efficiency. What matters is total use against what is available and how much competition there is.
Energy use is expected to include reporting, a regulator and testing. Water use will need the same, and the standards should include noise, electronic waste and emissions. If, as the industry and government claim, there is no need to worry, neither should object to such standards.
Done poorly, Australia’s data centre boom could suck up scarce water supplies and increase the use of fossil fuels. But if done well, we could grow the industry using clean power and ensuring water use is monitored and minimal.
The difference comes down to having data. Much of the extra data we need to track data centre impact can be gathered by the Australian Bureau of Statistics – just as Ireland has done.
Transparency can help the data centre industry improve its social licence to operate. With data we can see if the largely national and international economic benefits of data centres justify the mostly local environmental costs.
Michael Vardon is affiliated with the Society of Natural Capital Accounting. These views are his own. He has previously worked for the Australian Bureau of Statistics.
Original source: https://analysis1.mil-osi.com/2026/09/14/unsustainable-or-manageable-we-dont-yet-know-how-data-centres-will-impact-australias-environment/