Data centre regulation in Australia: spotlight on Victoria and NSW

Policy document 

The Sustainable Data Centre Action Plan 

NSW Data Centre Guidelines; NSW Data Centre Policy Framework 
 

Primary planning and environmental approvals / compliance legislation 

Planning and Environment Act 1987 (Vic); Environment Protection Act 2017 (Vic)

Environmental Planning and Assessment Act 1979 (NSW); Electricity Infrastructure Investment Act 2020 (NSW); Protection of the Environment Operations Act 1997 (NSW) 
 

Specific land use

Victorian planning schemes are proposed to be amended to include a specific land use definition for data centres: ‘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’. 

The Standard Instrument – Principal Local Environmental Plan, which is the current template document for all local environmental plans, contains a standard definition for data centres as ‘a building or place the principal purpose of which is to collect, distribute, process or store electronic data using information technology’.
 

Locational controls 

The Action Plan states that data centre developments will be prohibited:

• on residentially zoned land;
   
• within 150 m of any residential building; and
   
• in rural zones unless located near and able to be served by critical infrastructure.

Victoria’s Planning for Melbourne’s Green Wedges and Agricultural Land Action Plan 2024 has also committed to prohibiting new data centres in Green Wedge Zone and Rural Conservation Zone land. 
 

Data centres are a type of ‘high technology industry’, which falls under the broader category of ‘light industry’.

Data centres are generally permissible with consent in specific business, employment, industrial and productivity zones, including B5 Business Development, B7 Business Park, E3 Productivity Support and E4 General Industrial.

Referral requirements 

The Victorian Planning Provisions are proposed to be formally amended to extend referral authority status to Worksafe Victoria, Fire Rescue Victoria, VicGrid and the relevant water corporation for all data centre permit applications.  

Amendment VC324 also proposes to expand the EPA’s role as a referral authority to any data centre application (rather than just those requiring a licence under the Environment Protection Act 2017 (Vic)). 
 

The referral requirements will vary depending on the location of the data centre. 

Referrals may be made to NSW EPA, Fire Rescue NSW, Transport for NSW, the Conservation Programs, Heritage and Regulation Group (DCCEEW) and Sydney Water.

The State Referral Provisions (June 2026) published by the Development Coordination Authority provides guidance on the various referrals that may be required.

Energy supply 

To ensure that data centre electricity demand is met by new investment in renewable energy, the Action Plan contemplates that data centres will be required to: 

• offset actual operational electricity use by investing in new renewable energy generation and storage;
   
• cover all connection costs and network augmentations required as a direct result of new investment, including necessary upstream augmentations; and
   
• participate in demand flexibility services to the maximum extent ‘commercially and technically’ possible. 
   

Facilities to enter into PPAs and firming agreements for additional renewable energy generation assets to meet electricity demand. 

Designs are to be based on climate data representing average annualised conditions and mature data centre utilisation. 

Facilities to enter commercial arrangements with energy and water utilities that protect customer base from utility costs and stranded asset risks.

Facilities using water-intensive cooling systems will use 100% recycled water for cooling operations or have a transition agreement with a water utility company. 

No adverse impact on agricultural water use in agricultural areas. 

Facilities using drinking water as an interim measure must be designed to allow for reduced usage. 

Water usage 

The Action Plan contemplates data centres will be required to meet the full cost of water infrastructure required for operations. 

The Action Plan also states that facilities using water cooling-based systems will be required to use recycled or non-drinking water sources in their operations, or hold a transitional agreement with a water corporation and offset interim use of drinking water through funding agreements or water efficiency programs.   

Facilities using drinking water as an interim measure must also be designed to allow for reduced usage.
 

Energy and water efficiency standards 

Data centres to be required to achieve high levels of power usage effectiveness (dPUE), designed to industry best-practice targets and measured to national standards. 

In respect of water, the Action Plan identifies the need for alignment with mandatory minimum water-use and reporting standards, and that facilities will be required to design to Water Usage Effectiveness (dWUE)<1.0 (potable) or <1.6 (non-potable) or as otherwise agreed with the water corporation, measured in line with ISO/IEC 30132-9.2022. 

Data centres to design for Power Usage Effectiveness dPUE and Water Usage Effectiveness dWUE targets within the following ranges: dPUE < and dWUE <1.0 (potable water) or dWUE <1.6 (non-potable water) 

Or 

dPUE <1.3 and dWUE <0.44.  

Facilities must demonstrate ability to reduce grid-supplied electricity demand by 25% for a two hour period (excluding use of diesel back-up generators).

They also have smart energy and water installation requirements. 
 

Air quality standards 

The Action Plan states that proponents must:

• restrict backup diesel generation to emergencies and mandatory testing;
   
• deploy best-available technology;
   
• undertake continuous monitoring;
   
• report on emissions and runtime; and
   
• mitigate air quality impacts. 
   

Facilities required to demonstrate ambient air health-based criteria and meet NSW Clean Air Regulation ‘Group 6’ air pollutant limits for diesel back-up generators.

Noise standards 

Statewide industrial/commercial noise limits apply with night time limits of 55dB(A), with a penalty for tonal noise. 
 

Require preparation of quantitative noise and vibration impact assessment. 

Safety standards 

The Action Plan highlights the strength of existing regulation, and suggests that there will be regulatory coordination between Energy Safety Victoria, WorkSafe Victoria, Fire Rescue Victoria and the CFA to ensure ‘consistent regulatory expectations across agencies’.
 

Facilities to demonstrate appropriate management and controls for fire and explosion risks in accordance with SafeWork NSW and Fire and Rescue NSW guidance. 

Retrospective operation? 

No. The Premier has stated that “[t]he new rules won't be retrospective for applications under assessment, but we expect data centres to continue to work with locals and respond to their concerns”. 
 

No. The Guidelines do not impose mandatory requirements, but we expect that proponents will be encouraged to meet the standards imposed under the Guidelines where possible.

Local investment requirements 

The Action Plan contemplates a ‘Local Investment Guarantee’, focussed on local employment, First Nations engagement, local procurement, and local amenity, to be established as part of a data centre development. 
 

Encourage prioritised use of local content and supply chains, support training of data centre construction and operators.