NSW lays down the rules for data centre developments

The NSW Data Centre Policy Framework also sets out expectations for the sector to contribute to renewable energy infrastructure, water infrastructure, support local workforce development and engage in benefit-sharing with local communities.

Along with the NSW Data Centre Guidelines, the framework will ensure future data centre investment is matched with increased investment in renewable energy and water infrastructure.

It establishes clear expectations for data centre proponents, with world-class energy, water and environmental standards, meaningful community consultation and appropriate contributions towards the infrastructure needed to support growth.

According to the NSW Government, there are currently 19 data centre projects valued at $50.3 billion in the State Significant Development pipeline, and already more than 60 data centres that are already operating or under construction.

“Data centres are the enabling infrastructure for modern economies and communities,” Minister for Planning and Public Spaces Paul Scully said in the government media statement.

“These Guidelines provide clear expectations, improving transparency and providing certainty for both communities and investors.

“We’ve struck the right balance, maintaining strong environmental standards to safeguard our water and energy future while supporting faster and more certain planning assessments for data centres which protect the interests of communities while delivering them benefits.”

The principles

Under the new framework, data centre builders wanting access to a streamlined assessment process will need to comply with the NSW Data Centre Guidelines.

They require specific performance measures to achieve six principles:

1. Apply world-class environmental and efficiency standards
2. Impose no net cost to consumers and communities
3. Fund additional supply of water and energy
4. Enhance local community infrastructure and amenity
5. Invest in future industries across the supply chain
6. Demonstrate a commitment to training and skills to support jobs.

The government has pledged that project proposals that meet these requirements can expect the developments assessed within 75 days. Changes are also being made to the Independent Planning Commission processes to further streamline key project assessment.

Reforming energy and water approaches

Under the second pillar of the framework, the NSW Government will make regulatory changes to ensure that data centres pay for the electricity network upgrades they require, so that extra costs aren’t shifted to households and small businesses. The changes will also support more coordinated and efficient planning of the electricity network, and support implementation of the measures in the Guidelines.

“As demand for data centres increases, NSW will ensure the infrastructure needed to support them grows with it,” Minister for Climate Change, Energy and the Environment, Penny Sharpe says.

“These reforms will make sure data centre growth drives investment in renewable energy, while holding operators to the highest air quality standards.”

The NSW Government is commissioning IPART to undertake a review of the water pricing framework for data centres.

The review will consider how water pricing can reflect the full costs associated with servicing data centres, ensuring other water users on the network are protected and the impacts of drought and water scarcity are appropriately managed.

Under the NSW Guidelines, data centre design and operational strategies must target power usage effectiveness (PUE) and water usage effectiveness (WUE) targets that are informed by international examples. These aim to protect the community from increased costs and reduced reliability of both energy and water supplies.

For example, if cooling systems require water, then the system should be as water efficient and possible and target recycled water as a first choice.

“Data centres using potable water as an interim measure while waiting for recycled water access, will design their facilities to allow for reduced water use in the event of water restrictions imposed in response to a drought: e.g. by adopting hybrid-cooling systems that allow minimal water use in drought events,” the guidelines state.

Similarly, procurement of renewable energy is to be the primary energy strategy.

The guidelines note that achieving appropriate energy and water solutions will require project proponents to engage early in effective consultation with communities and utilities, and to plan investments in relevant resources including “rainfall-independent” water supplies.

Air quality targets have also been included, to address the potential impacts of diesel generator use on local pollution levels.

The Green Building Council of Australia (GBCA) approves

GBCA Chief Executive Officer Davina Rooney said the framework provides a strong foundation for responsible growth in a sector that is evolving rapidly as demand for digital services and artificial intelligence continues to grow.

“The NSW Government’s framework sets an important ambition for what world-class data centre investment should look like in Australia,” Rooney said.

“As demand for digital infrastructure continues to grow, it is essential that new investment strengthens our economy while leaving communities better off. We welcome the framework’s focus on environmental performance, resource efficiency and ensuring growth delivers no net cost to consumers and communities.”

The organisation said clear expectations and greater certainty would provide benefits for investors, industry and local communities alike.

GBCA also supported the NSW Government’s decision to establish an Industry Advisory Forum, describing ongoing engagement as essential to ensuring policy settings remain effective as technologies, markets and community expectations continue to evolve.

“Data centres are a rapidly changing industry. The establishment of an Industry Advisory Forum will create an important mechanism for government and industry to work together to respond to emerging opportunities, new technologies and evolving market conditions,” Rooney says.

• Read the NSW Data Centre Policy Framework and Guidelines 

The Climate Council noted that the shifts in NSW are in alignment with current work by the Federal Government on legislating national standards for data centre developments and operations. It is expected the national policy will require data centres to supply their own renewable power, according to Climate Council Senior Advisor, Ben McLeod.

“Australians are rightly asking: Where is the power for the data centre boom going to come from? Guidelines like these set us on the path to making sure the answer won’t push up household bills, or climate pollution. The NSW Government should be decisive in shielding its citizens and make these expectations mandatory,” McLeod says.

“All states and territories should get on board with similar rules under the proposed national guidelines. Governments must set the bar higher, and require data centres to be powered by new wind, solar and storage, otherwise Australians will pay the price of higher power bills and more climate pollution.”

---