NSW data centre inquiry finds no coherent strategy, rejects moratorium

A New South Wales cross-party inquiry into data centres found approvals failed to consider cumulative impacts on water, electricity and infrastructure. It stopped short of recommending a moratorium, prompting a rebuke from its chair, who warned of an "AI-fuelled data centre frenzy" threatening energ

SYDNEY, 5 Nov — An inquiry into data centres by Australia's most populous state found approvals failed to consider the cumulative effect on resources and infrastructure but stopped short of calling for a moratorium, prompting a blistering rebuke from its chair.

The report by the New South Wales cross-party inquiry reflects a growing tension facing lawmakers globally as they navigate an AI-led buildout that McKinsey estimates will be worth US$7 trillion by 2030: they want to benefit from the boom but communities are putting up increasingly robust resistance. The tension is especially strong in New South Wales, of which Sydney is the capital, where developer NextDC and ChatGPT owner OpenAI are awaiting approval for a data centre. There is a state election next March, and already residents in one suburb prompted a smaller project to be withdrawn.

The report found the state lacked a coherent strategy to manage the data centre boom's impact on water, electricity and infrastructure. It warned current guidelines may underestimate future power demand and water supply limits, and that "clustering" facilities could create infrastructure pressures. "The current planning framework assesses data centres primarily as individual developments despite many impacts being cumulative in nature," it said. "Data centre … impacts are cumulative and are being felt across communities and other industries."

But it stopped short of recommending a halt to approvals, and instead called for a comprehensive data centre strategy and better coordination between participants in the approvals pipeline. Minutes attached to the report showed members of the Public Accountability and Works Committee voted 6-1 to remove recommendations for a state and national moratorium on data centre approvals "until such time as all social and environmental harms can be fully understood".

Committee chair Abigail Boyd, an upper house member from the Greens party who cast the lone vote to keep the recommendations, wrote in the report's foreword that an "AI-fuelled data centre frenzy" was "threatening to consume incomprehensibly large volumes of energy and water to feed their demands". "It is increasingly apparent that governments of all persuasions have been suckered in by an AI-fuelled get rich quick scheme, with data centres suiting the needs of governments short on ideas perfectly," she wrote. "But it's a false economy."