The Federal Government has flagged its intention to legislate Australian Standards for AI in 2027, reflecting the National AI Expectations framework released in March 2026 and subsequent government announcements regarding intentions to regulate energy, water, land use impacts and locational aspects of data centre development in Australia. Primarily, the emphasis is on securing energy from renewable energy sources, a “user-pays” approach to energy and water infrastructure required for a data centre development and ensuring that social licence is maintained.
Notwithstanding the anticipated introduction of Federal regulations in 2027, the NSW and Victorian Governments are first movers and have issued their own guidelines and proposed rules concerning data centre development. Relevantly:
- The Victorian Government published The Sustainable Data Centre Action Plan (see here) (VIC Plan) on 22 September 2026, which outlines expectations for data centre developers. Although indicative of the incumbent Labor government’s future policy intentions, many items are already enforceable under distinct instruments, such as user-pays connection to energy and water infrastructure, acoustic limits, safety requirements and fire regulations. It is yet to be seen how many of the further requirements are enacted before the pre-election caretaker mode commences on 3 November 2026. It is also unclear if these expectations will be adopted by a Victorian Liberal Government should they win the State election. Importantly, these rules will not affect data centres currently in operation, under construction or subject to an existing planning assessment.
- The NSW Government published the NSW Data Centre Guidelines in August 2026 following public consultation (see here) (NSW Guidelines) and introduces a performance-based approach to data centre development. There is significantly more detail contained in the NSW Guidelines as compared to the VIC Plan. The focus of the guidelines is on a user pays approach to energy and water infrastructure including an emphasis on securing renewable energy and recycled water to support the development operations. The requirements also cover public benefit sharing, sustainability standards and fire regulation. If a data centre developer can demonstrate compliance with the guideline principles and performance measures, then beneficial planning application support and accelerated development assessment pathways are available under the NSW State Significant Development (SSD) framework.
An Analysis of NSW and Victorian Approach
The NSW and Victorian approaches are generally consistent with the Federal Government’s expectations on AI. However, despite addressing many similar issues, the detail in the VIC Plan and NSW Guidelines is not homogenous.
Both approaches can be understood against the backdrop of a significant and growing energy challenge. Data centres currently account for approximately 2 per cent of Australia’s national electricity consumption, a figure forecast to grow to between 8 and 11 per cent by 2035 (see here). In New South Wales alone, Transgrid’s 2026 planning report (see here) forecasts data centre peak demand growing from around 0.5 gigawatts today to 3.5 gigawatts by 2035, representing over 20 per cent of the state’s peak demand and accounting for 66 per cent of the gross growth in energy consumption across the decade. Both the VIC Plan and the NSW Guidelines impose renewable energy procurement obligations, ‘user pays’ infrastructure cost requirements, and energy efficiency performance measures. Importantly, the mandated transition to new renewable supply will require realistic transition periods, and developers will need to plan carefully for the contractual and financial obligations that flow from these requirements.
The following table outlines the key similarities and differences:
| Victoria | New South Wales | ||
| Planning application support | All data centre developments will have access to the Investment Front Door, a single point of contact for investors to communicate with the various relevant State Government departments. If any cross-agency issues arise, the Investment Co-ordinator General will provide a single point of accountability and contact for cross-agency delay. Pre-application feasibility assessments are available. | Developers that meet the guideline requirements will receive access to dedicated “concierge services” within the NSW Department of Planning, Housing, and Infrastructure (DPHI). Pre-assessment support is also available. NSW has also established the Investment Delivery Authority (IDA) which, for qualifying proposals, provides a “whole of government” approach to progressing a data centre development including coordination between relevant State Government departments and agencies. Projects are selected via an Expression of Interest (EOI) process with initial EOIs occurring in March 2026 and 15 projects selected. These projects were not new projects and were significantly advanced in the State Significant Development (SSD) assessment process. | |
| Regulator involvement | Historically, the Victorian EPA was a statutory referral authority for data centre planning applications. That will be expanded to include Worksafe Victoria, Fire Rescue Victoria, VicGrid and the relevant water corporation for all data centre applications (including where assessed under the DFP or by local councils). This increased referral requirement is aimed at increasing consistency and providing the necessary up-front input from critical agencies. | The NSW Guidelines do not propose to change any of the statutory referral, integrated development or concurrence requirements under the NSW planning controls. However, there will be significantly more involvement from the relevant water authority and energy providers when considering any SSD application given the emphasis on “user pays”, securing renewable energy and recycled water supply up-front. In particular, significant amendments have been proposed via the Electricity Infrastructure Investment Amendment Bill 2026, currently awaiting a second reading in the Legislative Council, which seeks to align with the NSW Guidelines and the National AI Expectations. Amendments proposed relate to “Large Load Infrastructure” (LLI) proposals such as data centres and allows for regulation of connection of LLIs to the electricity network with a focus on costs recovery and locational aspects. In essence, the assessment process is a gateway to connect to the network. | |
| Planning approval pathway | The planning approval pathways have not changed. Data centre developments in Victoria already benefit from the expedited planning pathway called the Development Facilitation Program (DFP) if the cost of the development is:
Most data centre developments qualify to benefit from the DFP pathway. Developments under this threshold remain on the local council planning pathway. | It is expected that most new data centre developments would meet the SSD thresholds - being over 15MW. This threshold has not changed. However, if all of the criteria are met in the NSW Guidelines, then the applicant will have access to a 75 day assessment timeframe of the SSD Environmental Impact Statement by the DPHI (noting that this excludes any Secretary Environmental Assessment Requirements (SEARs), Response to Submission (RTS) or amending application time periods). | |
| Community participation | Implementation of improved public consultation and transparency is a key objective. Active engagement with local communities, First Peoples and host municipal councils is required prior to and during the planning process. Applicants for a data centre development proposal must:
There will be two touch points for community consultation including:
| There is a requirement to engage meaningfully with local stakeholders such as communities, local government and First Nation groups to ensure participation throughout the planning assessment process. However, substantial community consultation requirements are already built into the SSD framework and significant changes to the regime are not expected. | |
| Locational requirements | A land use definition of data centres will be incorporated into planning schemes: Land used to collect, distribute, process, or store digital data. It does not include collecting, distributing, processing, or storing digital data if it is ancillary to another use of the land. Data centres will be prohibited on:
There must also be a 150m buffer between a residential building and a proposed data centre building. It is also made clear in the VIC Plan that the Planning for Melbourne’s Green Wedges and Agricultural Land Action Plan 2024 has committed to prohibiting new data centres in Green Wedge Zone land. In 2027, following stakeholder consultation, a Statewide planning policy will be implemented to guide location, design, scale and infrastructure requirements. | The NSW Guidelines seek to incentivise siting data centres:
For example, lower pollutant standards will apply to data centres located outside the metro area, regional towns and away from sensitive receivers. The NSW Guidelines suggest, for example, that an ideal site might be a retired power station or mine site (with these sites potentially having ready access to energy and water). There is also emphasis on co-location with energy generation, such as in the Renewable Energy Zones (REZs) which are likely to require fewer infrastructure upgrades.
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| Energy and water efficiency (PUE and WUE requirements) | Specific Power Usage Effectiveness (PUE) targets are not prescribed however, there is an expectation that PUE will be designed to industry best-practice targets and measured to recognised national standards. Design water usage effectiveness (WUE) requirements:
The above design WUE may be varied by agreement with the water corporation. | Performance measures have been implemented requiring the following design usage effectiveness scores:
Designs are to be based on climate data representing average annualised conditions and mature data centre utilisation (assuming 100% IT load). | |
| Energy and water infrastructure costs | Implementation of the “user pays” principle with all associated upstream connection costs and augmentation required as a direct result of the proposed investment to be the proponent’s responsibility. Participate in demand flexibility services to the maximum extent commercially and technically possible.
| Demonstrate a no “net cost” to consumers and communities. This includes:
| |
| Renewable energy requirements | A requirement to offset actual operational electricity use by investing in renewable generation and storage. The VIC Plan indicates that Victoria will work with the Commonwealth to develop the policy settings around offsetting electricity demand through additional renewable generation. | A requirement to enter into power purchase agreements (PPA) or firming agreements for additional NSW renewable energy generation assets to meet data centre electricity demand including:
| |
| Air Quality and Emissions | Restrict use of backup diesel generation to emergency and mandatory testing circumstances. Deploy the best-available technology (such as US EPA Tier 4 equivalent generators) and continuously monitor emissions whilst mitigating air-quality via crediting or localised equivalent management. | NSW has provided more detail on the air quality criteria including that for data centres located within metropolitan cities and near regional towns, the Group 6 air pollutant limits of the Protection of the Environment Operations (Clean Air) Regulations 2022 must be met for diesel back-up generators, being:
As noted above, for data centres located outside metropolitan areas and regional towns and away from sensitive receivers (for example on a retired power station and mine sites), lower US EPA Tier 2 pollutant limits for “non-road compression ignition engines” must be met. Data centres utilising this standard will need to demonstrate limited impact on the community through air quality impact assessments. | |
| Direct Local Benefit | Data Centres must provide a ‘Local Investment Guarantee’. The details are to be developed however, the general principles include:
Investments that are to be considered include local employment, skills development, training partnerships, engagement with First Nations communities, local procurement and measures to improve local areas (trees, parks and community facilities). | Modelled on the “benefit-sharing” concept for the NSW renewable energy zones, data centre proponents must demonstrate benefit sharing arrangements with local communities which support tangible social, environmental and economic outcomes for example, supporting local sports teams, investing in community facilities, local employment training etc. Benefit-sharing is separate to the developer contribution obligations expected under sections 7.11 and 7.12 of the Environmental Planning and Assessment Act 1979. | |
| Water usage | Data centres are expected to use recycled water sources and if recycled water is not available:
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| Climate Change | If potable water is used during a transition to non-rainfall dependent sources, such as recycled water, the data centre design must demonstrate that demand for water can be reduced, such as through hybrid cooling systems. | ||
| Optic fibre and telecommunications | Early engagement with the relevant utility provider to ensure that sufficient infrastructure is in place, such as underground conduits, to minimise local amenity impacts. | ||
| Local supplier and employment | Prioritise local suppliers and engage with the respective government to support local supply chains. Deploy various local apprenticeships and traineeships with organisations such as TAFE to support employment. Victoria has further requirements for engagement with industry and unions to ensure skill development, as well as encouraging local employment where the facility is developed regionally, or in an area with high unemployment. | ||
| Direct Local Benefit | Data Centres must provide a ‘Local Investment Guarantee’. The details are to be developed however, the general principles include:
| Modelled on the “benefit-sharing” concept for the NSW renewable energy zones, data centre proponents must demonstrate benefit sharing arrangements with local communities which support tangible social, environmental and economic outcomes for example, supporting local sports teams, investing in community facilities, local employment training etc. Benefit-sharing is separate to the developer contribution obligations expected under sections 7.11 and 7.12 of the Environmental Planning and Assessment Act 1979. | |
| Noise | No major changes are proposed and Victoria will continue to rely on the statewide industrial noise limits with a 55dB(A) nighttime limit. Where multiple data centres are operating or proposed in the same area, assessments will be cumulative. | No major changes are proposed and proponents will need to continue to provide an EPA-compliant expert quantitative noise and vibration impact assessment (for both the construction and operation phase) during the SSD application process. | |
| Safety | Follow guidance from the relevant government authority regarding fire and explosion risk and electrical safety, including Energy Safe Victoria, WorkSafe Victoria, Fire Rescue Victoria and the CFA. | Follow guidance from the relevant government authority regarding fire and explosion risk and electrical safety, including Fire and Rescue NSW and SafeWork NSW, eg in relation to large volumes of diesel stored on site, lithium-ion batteries and complex electrical work. | |
A nationally consistent approach?
While the Federal Government’s intention is to achieve a nationally consistent approach through the introduction of the Australian Standards for AI in 2027, this will be a difficult objective to achieve. This was demonstrated by a recent National Cabinet meeting where all States and Territories, except for QLD and NT, indicated that they will adopt a mandated renewable energy use requirement for new data centre developments. Further, the powers of the Federal Government are restricted and will require facilitative legislation from the States and Territories to achieve outcomes.
At this stage, the status of data centre policy in other States and Territories are as follows:
Tasmania
The Tasmanian Government published Draft Expectations for Data Centres and AI Infrastructure Developers: Tasmania on 7 September 2026 (see here) for consultation until 12 October 2026 (TAS Expectations). The TAS Expectations are high level and contain significantly less detail than the VIC Plan and NSW Guidelines. They are also framed as a “non-statutory statement” of government policy and are not intended to create a new approval or regulatory process or alter existing statutory criteria. Seven key expectations for data centre developers are identified:
- Maximise benefit to Tasmania: Through employment, local community benefit, use of local supply chain and infrastructure expansion cost recovery.
- Early engagement with community and stakeholders: Clear and transparent engagement with local communities and the Tasmanian Aboriginal community.
- Engagement with Tasmanian Government: Via the Office of the Coordinator-General.
- Supporting Tasmania’s energy system: Via firming arrangements, demand management, energy security, timing excess demand relative to renewable supply, paying for network upgrade costs and supporting new renewable projects.
- Sustainable water usage: Optimising efficiency and security.
- Approval pathways: Data centres continue to be assessed through the Resource Management and Planning System.
- Transparency and reporting.
South Australia
On 28 June 2026, the South Australian Government published their Data Centre Strategy (see here) (SA Strategy). The SA Strategy intends to streamline development for data centres whilst mitigating adverse impacts to consumers by firming new energy supply, allocating infrastructure upgrade costs and encouraging responsible water use. The intention is to introduce a designated Data Centre and AI Infrastructure Act in the future, however, the Bill has not yet been tabled.
Separately, under the Planning, Development and Infrastructure Act 2016 (SA), data centre projects are now facilitated by a streamlined approval pathway subject to the projects meeting energy and water usage requirements. The newly established Co-ordinator General’s office also has extensive powers to expedite the approval pathways and it is anticipated that those powers will be utilised for state significant data centre developments.
Amendments have also recently been made to the Planning, Development and Infrastructure (General) Regulations 2017 to allow preparatory work in advance of data centre construction (namely excavation, fencing and access road construction) without a development approval.
Australian Capital Territory
Outside of a media release dated 26 August 2026 (see here), the Australian Capital Territory has released very little in terms of data centre development direction. The media release endorses the upcoming Commonwealth legislation and alludes to the upcoming publication of the ACT Data Centre Framework in early 2027.
Other
Western Australia, Queensland and the Northern Territory are yet to produce data centre specific guidelines.
Also, both incumbent Queensland and Northern Territory energy ministers objected to implementation of a national framework during the Energy and Climate Change Ministerial Council and the use of renewable energy in connection with data centres. Accordingly, it is unlikely that the respective incumbent governments will introduce regulation beyond the Commonwealth standard or legislate to support the National AI Expectations.
The Queensland Government is also diverging from the NSW and Victorian trend of elevating most data centre development applications into a State assessment planning pathway by passing the State Development and Public Works Organisation (Critical Minerals) and Other Legislation Amendment Act 2026 (assented to on 3 September). This legislation prohibits data centres from being deemed State strategic projects.
Conclusion
It is not clear what the legislative implementation of the Australian AI Standards by the Federal Government in 2027 will achieve including what impact it will have on achieving a truly nationally consistent approach to data centre development, particularly given the current position of the Queensland and Northern Territory Governments on renewable energy use.
Notwithstanding this uncertainty, NSW and Victoria have generally aligned themselves with the National AI Expectations and signals from most States and Territories indicate an emphasis on a “user pays” approach to water and energy infrastructure, locational adequacy and creating social licence through benefit sharing with local communities and supporting employment and training.
For data centre developers and investors, the community participation and benefit-sharing requirements that feature prominently in both the VIC Plan and NSW Guidelines reflect a broader policy expectation that digital infrastructure growth should deliver tangible outcomes for local communities, not merely for investors, operators and end customers. The practical effect is that social licence considerations have become a material factor in project economics: developers who integrate genuine community engagement, energy solutions and sustainability outcomes into their project design from the outset are likely to find that assessments proceed more efficiently and that regulatory support is more readily forthcoming.