In brief
- Australia now has a patchwork of state and territory data centre rules sitting beneath a Commonwealth framework.
- The Commonwealth intends to legislate mandatory national standards for large data centres in early 2027, covering energy, water, land use, community engagement and skills, following National Cabinet's August 2026 agreement.
- Victoria's Sustainable Data Centre Action Plan is among the most prescriptive instruments in the country on siting and resource use, a land use definition for data centres that Victorian planning schemes will include, a 150-metre residential buffer, ‘bring your own’ renewables, recycled-water cooling and numeric efficiency targets.
- NSW and South Australia tie faster approvals to compliance; Victoria instead layers coordination over existing processes without a fixed statutory clock.
- Queensland, WA and the NT remain investment-led, with no dedicated plan, for now.
In Australia, the user-pays principle for energy and water infrastructure is broadly endorsed across jurisdictions with a dedicated policy: proponents fund their own connection, augmentation and servicing costs.
The national backdrop
The Commonwealth published its Expectations of Data Centres and AI Infrastructure Developers in March 2026, setting out expectations that operators bring new clean energy, pay their full grid-connection and network costs, and run as a flexible load that supports the grid. Following National Cabinet’s August 2026 agreement, the Department of the Prime Minister and Cabinet released a consultation paper on mandatory national standards addressing energy, water, costs, community engagement, location and workforce. Critically, those standards are designed to complement, not replace, state planning and approval regimes, and states and territories remain free to impose more stringent local requirements.
Victoria’s Plan: the key principles
The plan is organised around four enablers and is enforced through a new data centre category in the planning system, together with new energy and water referral and notification controls. Rather than displacing existing planning, environmental, water and energy frameworks, it builds on them.
The plan applies to all permit applications for data centres lodged on or after 23 September 2026 and does not apply retrospectively to data centre projects that were already approved or under assessment.
- Land use, location and local impact: a land use definition for data centres that Victorian planning schemes will include; locational controls to prohibit data centres in residential zones with a 150-metre buffer from residential buildings and in rural zones unless serviced by critical infrastructure; and statewide siting, design and amenity controls (noise, air quality and traffic).
- New energy supply and grid readiness: new data centres must offset operational electricity use through new renewable generation and storage, meet all connection and network augmentation costs, participate in demand flexibility, and achieve best-practice power usage effectiveness (PUE).
- Protecting drinking water and securing supply: water-intensive cooling is expected to use recycled or non-drinking water (or an agreed transition to it); design targets of dWUE ≤ 1.0 (potable) or ≤ 1.6 (non-potable), unless otherwise agreed, measured to ISO/IEC 30134-9:2022; agreed offsets for interim potable use; the full cost of water infrastructure borne by the proponent; and annually reviewed efficiency standards with public reporting aligned to national standards.
- Victorian jobs, skills and local benefit: a Local Investment Guarantee covering local employment, training, First Nations engagement and local procurement, backed by obligations to train Victorians, buy Victorian and hire where facilities are built.
Victoria pairs these obligations with facilitation: a single “Investment Front Door”, coordinated regulator input, an Investment Coordinator-General as an escalation point, and expanded planning referrals to WorkSafe Victoria, Fire Rescue Victoria, VicGrid and the relevant water corporation.
Importantly, requirements set out in the plan will be published and reviewed as conditions evolve, to keep pace with the changing technology while providing certainty for projects already in progress.
How the jurisdictions compare
Five jurisdictions, Victoria, NSW, South Australia, Tasmania and the ACT, now have a dedicated data centre policy instrument, at varying stages of maturity. Queensland, Western Australia and the Northern Territory continue to attract investment through broader digital and economic strategies rather than a standalone plan. The appendix compares each jurisdiction in detail. The main practicalities are outlined below.
- Siting: Victoria is the most prescriptive, combining a land use definition for data centres that Victorian planning schemes will include with both locational controls to prohibit data centres in residential areas and a fixed 150-metre buffer. The ACT also bars residential-zone development but relies on existing zoning; NSW steers siting through guidance rather than prohibition; and Queensland, WA and the NT have no defined data centre land use at all.
- Energy: several jurisdictions support a ‘bring your own renewables’ principle across Victoria, SA, Tasmania, the ACT and the Commonwealth, but the mechanism differ, from Victoria’s offset-plus-PUE requirements to NSW’s ten-year power purchase agreements and SA’s ‘new firmed supply’ condition. Queensland and the NT did not join the July 2026 additionality agreement.
- Water: Victoria sets particularly detailed requirements, mandating recycled or non-drinking water for intensive cooling and numeric dWUE targets, while NSW works through demand forecasting and an IPART cost-recovery review and most other jurisdictions address water only at the level of principle or disclosure.
- Approvals: NSW and SA offer faster approval pathways, including a 75-day assessment commitment and a streamlined essential-infrastructure pathway respectively, whereas Victoria layers coordination over existing processes without a fixed statutory clock, and Tasmania and the ACT currently attach no fast-track.
- User-pays: the user-pays principle for energy and water infrastructure is broadly endorsed across jurisdictions with a dedicated policy, so proponents should expect to fund their own connection, augmentation and water-servicing costs wherever they build.
What this means for investors, developers and financiers
- Site selection is critical. Residential buffers, zone prohibitions and brownfield preferences mean early, evidence-based site selection, with power, water and telecommunications capacity confirmed up front, is the major driver of approval risk and timing.
- Build resource obligations into project costs. Project budgets should account for the new renewable generation and storage, full grid connection and augmentation, recycled-water infrastructure, and demand-flexibility capability, rather than treating them as contingencies.
- Choosing a jurisdiction involves trade-offs. Faster pathways in NSW and SA are conditional on meeting the substantive energy and water bar, and the incoming Commonwealth standards will set a floor nationally that the Commonwealth Government intends to legislate in early 2027. Choice of location should weigh approval certainty and grid access, not just headline speed.
- Plan community benefits early. Victoria’s Local Investment Guarantee and the social-licence expectations emerging elsewhere mean local employment, training, procurement and First Nations engagement commitments should be scoped early and documented, not left to the end of the process.
- Plan for further changes in 2027. With the Commonwealth's proposed legislation, Victoria’s statewide planning policy and the ACT’s draft framework all due in early 2027, projects underway should build in flexibility to accommodate standards that are still taking shape.