Australia’s AI data centre boom raises concerns over power, water and jobs

Australia's rapid expansion of artificial intelligence infrastructure is drawing billions of dollars in investment, but its data centre boom is also raising concerns over electricity demand, water consumption, environmental pressure and the impact on local communities, reports the BBC. 

The country is emerging as an attractive destination for data centre investors, supported by available land, energy resources and political stability. 

Australia already has 162 data centres, while another 90 are planned, with more than $155 billion in potential investment reportedly in the pipeline.

Earlier this year, OpenAI Chief Executive Officer Sam Altman said Australia could become a global data centre hub if it chose to pursue that path.

One proposed facility in western Sydney would have a capacity of one gigawatt, potentially making it the country's largest single electricity user. 

Another facility under construction in Marsden Park is expected to become the largest data centre in the Southern Hemisphere.

AI demand drives infrastructure expansion

Data centres have long supported services such as online banking, email and cloud computing. 

However, the rapid growth of generative AI since the launch of ChatGPT in 2022 has significantly increased demand for computing infrastructure.

The location of data centres has also become increasingly important as AI applications require faster data processing and lower latency.

Australia has an estimated 13.6 million monthly AI users, making it one of the world's most active markets for the technology, according to figures cited by the BBC.

Industry representatives argue that expanding domestic data centre capacity could also help Australia develop its own AI sector instead of relying primarily on foreign technology providers.

Belinda Dennett, chief executive of Data Centres Australia, told the BBC that failing to build the necessary infrastructure could leave Australia capturing little of the AI value chain beyond being a consumer of imported technologies.

The country's land availability, political stability and membership of the Five Eyes intelligence alliance are also helping attract foreign investment, she said.

Economic gains versus rising energy demand

The data centre expansion is being welcomed by parts of Australia's business community as an important source of investment and economic activity.

Jon Whittle, a former director of the digital research centre at Australia's national science agency CSIRO, said the country needs to continue investing in AI infrastructure despite the challenges involved.

However, energy experts warn that the rapid growth of data centres could place significant pressure on the electricity grid.

The Australian Energy Market Operator estimates that electricity demand from data centres could triple by 2030. 

The Climate Council has also warned that without substantial investment in renewable energy and storage, the expansion could contribute to higher electricity prices in New South Wales.

There are also concerns that the need for continuous and reliable electricity could encourage greater reliance on fossil-fuel generation.

The BBC reports that some data centre operators in Australia and the United States are considering gas-fired power generation to meet their growing energy requirements.

New South Wales Treasurer Daniel Mookhey, however, said the data centre boom can go hand in hand with the expansion of renewable energy.

He told the BBC that private investment linked to data centres can help finance the transition away from ageing coal-fired power plants while supporting new industries and employment.

Water use adds to environmental concerns

Electricity is not the only resource under pressure. Large data centres require substantial amounts of water to cool their servers. Some facilities can consume as much as 40 million litres of water a day, according to the BBC.

The issue is particularly significant for Australia, where several regions already face water shortages and drought risks.

Sydney will need to expand its drinking water supply over the next five to 10 years to meet population growth, according to the Water Services Association of Australia.

Sydney Water has warned that data centres could account for up to 25% of the city's drinking water consumption by 2035.

Environmental groups fear that increased demand from data centres could force households and governments to rely more heavily on expensive alternatives such as desalination.

In July, Prime Minister Anthony Albanese announced plans for new legal requirements for large-scale data centres. 

Under the proposed framework, operators would be required to support power supply, limit water consumption and cover the cost of additional water infrastructure.

The legislation, expected to be introduced in 2027, would apply only to new projects, and not facilities that are already operating or under construction.

Communities question the local impact

The expansion is also facing resistance from communities living near proposed facilities.

In Lane Cove, Sydney, residents have complained about the constant noise generated by data centres. 

One resident cited by the BBC said she can hear a persistent hum from a facility located about 350 metres from her home.

Four additional data centres are planned for an industrial area nearby. One proposed facility would be just 16 metres from the nearest house and about 160 metres from a primary school.

Local officials and residents have also raised concerns about the impact on businesses and employment.

Lane Cove deputy mayor Rochelle Flood said residents were not adequately consulted about the area's transformation into a data centre hub.

Felipe Tanaka, a manager at a business in the industrial park, told the BBC that his company had been informed it would have to relocate to make way for a data centre.

While major data centres can create more than 1,000 jobs during construction, employment typically falls significantly once the facilities become operational.

Tanaka said relocation could force many local workers to leave their jobs.

Debate over the value of AI infrastructure

The controversy extends beyond the environmental and economic costs. Some residents are questioning whether the benefits of AI justify the resources being devoted to the infrastructure.

Critics argue that not all AI applications provide sufficient economic or social value to justify the energy, water and land consumed by data centres.

Flood told the BBC that communities are being asked to accept major infrastructure projects without being given clear answers about what the facilities will ultimately be used for.

The debate reflects a broader challenge facing Australia as it seeks to position itself as a major player in the global AI economy: how to capture the economic benefits of the technology while ensuring that the costs of powering it are not disproportionately borne by households and local communities.