‘AI-fuelled data centre frenzy’ slammed as report stops short of calling for pause

The NSW government has been urged to overhaul its approach to the artificial intelligence boom in a report that notes data centres could use twice the power and a quarter of the water as all of Sydney.

The cross-party legislative committee report, delivered on Thursday, found the state didn’t have a coherent strategy to impact surging demands on water, electricity and infrastructure, warning current guidelines may be underestimating future needs.

It called for a comprehensive data centre strategy and better coordination between responsible authorities, but stopped short of recommending a pause on development of data centres.

Committee chair and Greens MLC Abigail Boyd was the only one of the six-member Public Accountability and Works Committee to push for the moratorium.

In the report’s foreword she argued the “gravitational pull” of billions of dollars in AI investment had “distorted all other domains of society around it”, arguing the surge had “clear bubble-like characteristics”.

“This is an AI-fuelled data centre frenzy. The pipeline of planned projects is astonishing in scale, threatening to consume incomprehensibly large volumes of energy and water to feed their demands,” she said.

“There remains no binding requirements on this class of development to address these concerns.”

Penrith City Council and Lane Cove Council, which argued it had become a “case study in what happens when infrastructure growth moves faster than strategic planning”, had joined calls from environmental campaigners and some others for a data centre pause.

The inquiry heard from electricity provider AusGrid that data centre demand was expected to grow from 4 per cent of  NSW electricity load now to 17-30 per cent by 2040.

“The rapid growth of data centre customers presents one of the most significant challenges and opportunities facing our network in a generation,” customer group executive Fatima Bazzi said.

The Net Zero Initiative estimated that if the 22 new data centres are either approved or going through the approval process used 80 per cent of their stated capacity they would use more than double the electricity of greater metropolitan areas. 

Citing Sydney Water data, Resilient Sydney told the inquiry that data centres could increase Sydney Water's demand by up to 25 per cent.

“As the driest continent in the world, Australia cannot justify the use of important and vulnerable potable water supplies for cooling facilities such as data centres,” it argued.

That’s all weighed against the massive financial benefits. 

NSW had approved eight data centre projects worth more than $10 billion, including the biggest data centre in the southern hemisphere, by March this year. That makes up 12 per cent of all non-residential building investment.

The Investment Delivery Authority is assessing another 26 submissions worth $100 billion as part of the State Significant Development planning pipeline.

The report warned current guidelines may underestimate future power demand and ​water supply limits, and that "clustering" facilities could create infrastructure pressures.

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"The current planning framework assesses data ​centres primarily as individual developments despite many impacts being cumulative in nature," it said.

"Data centre ... impacts are cumulative ‌and ⁠are being felt across communities and other industries."

It called for the government to encourage the use of recycled water and define a framework to make sure data centre companies bear the efficient costs of servicing their water demands,

It recommended the government consider electricity capacity, emissions reduction objectives, and opportunities to align data centre growth with renewable energy.

A NSW government spokesperson said many of the committee’s findings reflected what the government had already heard while designing state guidelines.

“This growing industry can also help support new investment in the renewable energy projects the state needs, so a moratorium is not the answer,” the spokesperson told The Sydney Morning Herald.