NSW Data Centre Inquiry Finds Gaps in Approvals but Drops Moratorium Call

The report, from the state upper house's Public Accountability and Works Committee, said the planning framework "assesses data centres primarily as individual developments", even though their "impacts are cumulative and are being felt across communities and other industries", according to Reuters. It found that the state has no coherent strategy for managing the effects of the build-out on water, power and infrastructure, warned that current guidelines may underestimate future electricity demand and limits on water supply, and said clustering facilities in the same areas could create additional pressure on infrastructure.

The findings land as developers try to secure sites for AI computing in Australia's most populous state. NextDC and OpenAI are waiting for approval of a data centre in New South Wales, which holds a state election next March, and opposition from residents in one suburb has already led to a smaller project being withdrawn, Reuters reported. Any tightening of the approvals process would bear directly on that pipeline.

Committee minutes show members voted 6-1 to strip out recommendations for a state and national moratorium on data centre approvals "until such time as all social and environmental harms can be fully understood". The only vote to keep them came from the committee's chair, Abigail Boyd, a Greens member of the upper house.

Boyd used her foreword to the report to criticise the boom. She described an "AI-fuelled data centre frenzy" that threatens to consume very large amounts of energy and water, said governments of all political stripes had been "suckered in" by what she characterised as a get-rich-quick scheme driven by AI, and called data centres a "false economy".

In place of a pause, the report recommends that the state draw up a comprehensive data centre strategy and improve coordination among the agencies and other participants involved in approving projects.

The inquiry is one of several tests for the industry in Australia. A separate federal Senate committee inquiry into AI and data centres has heard calls for a pause from local councils in Sydney and Melbourne. At a Sydney hearing in September, Lane Cove Council's deputy mayor, Rochelle Flood, told senators that a hyperscale data centre in the planning pipeline was about 16 metres from the nearest home, and said that "without a moratorium, communities and our environment will be left dealing with the impact", according to Information Age. Councils in Melbourne's west, including Maribyrnong, Hume, Brimbank and Melton, made similar calls in their evidence. Operator AirTrunk told that inquiry that all of its existing and planned Australian data centres sit more than 500 metres from residential areas.

The pressure is not unique to Australia. Governments want the investment that comes with an AI-led build-out that McKinsey estimates will be worth $7 trillion by 2030, but community opposition to new facilities is growing, Reuters noted. In the United States, voters this week rejected data centres in most of the local ballot measures where they were on the agenda.

The federal Senate committee was scheduled to table its final report on 16 November, according to Information Age, which will show whether national lawmakers take a harder line than their New South Wales counterparts.