Data Centres as Enabling Infrastructure

Data centres drive economic growth and investment across Australia’s economy.

Data centres are at the core of Australia’s digital infrastructure, underpinning AI, cloud services, and the digital lives of Australians. Like other productive industries, data centres require energy and water. They use energy to power IT equipment, and they use energy and water in the support systems that cool servers and keep data centres running. Using water for cooling reduces the amount of energy needed.

Today, data centres consume 3.9 terawatt hours (TWh) of energy annually, or 2 per cent of Australia’s annual electricity consumption. They use the same amount of electricity as shopping centres in Australia, and much less than other industrial activities like mining and manufacturing. Data centre use is forecast to grow to around 6 per cent by 2030.

Data centres use 5.5 gigalitres (GL), or 0.04 per cent, of potable water nationally. This is seven times less water than Australia’s public swimming pools use annually. Data centres consume 0.7 and 0.2 per cent of Sydney and Melbourne’s water, respectively. This is forecast to reach 1.9 per cent for Sydney and 0.9 per cent for Melbourne in 2030.

Data centres generate large economic benefits relative to their energy consumption.

The technology sector, including data centres, generates around $12.6 billion in gross value added per TWh of energy consumed. This is higher than mining ($9.1 billion per TWh) and manufacturing ($8.8 billion per TWh). This reflects the essential role of data centres in enabling digital services across the economy.

Data centres are not just consumers of energy, they play an active role as investors across the supply chain, from generation to end use. Through power purchase agreements (PPAs) that underwrite new renewable projects and on-site solar installations, data centres currently support 1.5 TWh of renewable energy generation. This represents nearly 40 per cent of their energy consumption and is equivalent to powering over 200,000 homes annually.

Data centres have invested $3.1 billion in grid infrastructure since 2020, with a further $7.2 billion forecast by 2030. This includes $1.1 billion of excess capacity for communities and other industries. Data centres are over seven times more efficient than on-premise servers. They save electricity by aggregating compute power and using superior chips and cooling technologies.

Data centres are currently modest water users and are providing capital to invest in water-reducing technologies as they grow.

Investments in innovative cooling technologies, including closed-loop cooling systems, enable data centres to handle high-density AI workloads while maintaining water efficiency. Data centres have contributed $40 million to potable water pipeline upgrades, creating excess capacity for communities equivalent to the water use of 10,000 households.

Recycled water represents a major opportunity for data centres to reduce their potable water use. They are expected to invest between $500 million and $1.1 billion in recycled water infrastructure by 2030, potentially replacing up to half of their water consumption.

Effective policy settings can harness data centre growth in a way that accelerates Australia’s clean energy transition while ensuring sustainable energy and water practices.

Accelerating approvals, promoting industry-informed standards, and facilitating private investment will help Australia to position itself as a leading destination for sustainable data centre investment. These policy priorities will enable data centre growth to accelerate renewable energy deployment and drive investments in innovative and sustainable water solutions.

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