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Published : 15 Sep 2025, 11:07 AM
Authorities in Sydney approved construction of data centres without requiring measurable plans to cut water use, raising concerns the sector's rapid growth will leave residents competing for the resource.
The New South Wales state government, which presides over Australia's biggest city, green-lit all 10 data centre applications it has ruled on since expanding its planning powers in 2021, from owners like Microsoft, Amazon and Blackstone's AirTrunk, documents reviewed by Reuters show.
The centres would bring in a total A$6.6 billion ($4.35 billion) of construction spending, but would ultimately use up to 9.6 gigalitres a year of clean water, or nearly 2% of Sydney's maximum supply, the documents show.
Fewer than half the approved applications gave projections of how much water they would save using alternative sources. State planning law says data centre developers must "demonstrate how the development minimises ... consumption of energy, water ... and material resources" but does not require projections on water usage or savings. Developers need to disclose what alternative water supplies they will use but not how much.
The findings show authorities are approving projects with major expected impact on public water demand based on developers' general and non-measurable assurances as they seek a slice of the $200 billion global data centre boom.
The state planning department confirmed the 10 approved data centres collectively projected annual water consumption of 9.6 gigalitres but noted five of those outlined how they expect to cut demand over time. The department did not identify the projects or comment on whether their water reduction plans were measurable.
"In all cases, Sydney Water provided advice to the Department that it was capable of supplying the data centre with the required water," a department spokesperson told Reuters in an email.
Data centres could account for up to a quarter of Sydney's available water by 2035, or 135 gigalitres, according to Sydney Water projections shared with Reuters. Those projections assume centres achieve goals of using less water to cool the servers, but did not specify what those targets were.
Sydney's drinking water is limited to one dam and a desalination plant, making supply increasingly tight as the population and temperatures rise. In 2019, its 5.3 million residents were banned from watering gardens or washing cars with a hose as drought and bushfires ravaged the country.
"There is already a shortfall between supply and demand," said Ian Wright, a former scientist for Sydney Water who is now an associate professor of environmental science at Western Sydney University.
As more data centres are built, "their growing thirst in drought times will be very problematic," he added.
The number of data centres, which store computing infrastructure, is growing exponentially as the world increasingly uses AI and cloud computing. But their vast water needs for cooling have prompted the US, Europe and others to introduce new rules on water usage.
New South Wales enforces no water usage rules for data centres other than the government being "satisfied that the development contains measures designed to minimise the consumption of potable water," according to the documents.
DATA BOOM
Just three of the 10 approved data centre applications gave a projection of how much the developer hoped to cut reliance on public water using alternative sources like rainwater. The biggest centre cleared for construction, a 320-megawatt AirTrunk facility, was approved after saying it would harvest enough rainwater to cut its potable water consumption by 0.4%, the documents show.
An AirTrunk spokesperson said early planning documents referred to peak demand but "subsequent modelling recently tabled to Sydney Water has determined actual usage will be significantly lower".
The company was "working with Sydney Water to transition the site to be nearly entirely serviced by recycled water", the spokesperson added.
The most ambitious commitment to cut reliance on town water was 15%, for one of two data centres approved on land held by Amazon, planning documents show.
The two centres would collectively need 195.2 megawatts of electricity and take up to 92 megalitres a year of Sydney's drinking water before rainwater harvesting, say the documents, which give a projected reduction in water use for one project but not the other.
Amazon declined to comment on individual properties but said its Australian data centres avoid using water for cooling for 95.5% of the year because their temperature controls rely more on fans than evaporative cooling.
Microsoft gave a 12% projected water use reduction for one of the two Sydney data centres it has had approved. Microsoft declined to comment.
HARD SWALLOW
Sydney's suburban councils, meanwhile, want to slow what they see as competition for limited water supply, especially when the state wants 377,000 new homes by 2029 to ease a housing shortage.
"A lot of them have been built without much discussion," said Damien Atkins, a member of Blacktown council where state-approved centres owned by AirTrunk, Amazon and Microsoft are being built.
"There should be more pushback and I'm just starting to ask those questions now."
In the city's north, Lane Cove council asked the state to return approval powers to local government, citing water usage and other concerns.
Neighbouring Ryde council has five centres and another six in various stages of planning. It said those 11 would take nearly 3% of its water supply and has called for a moratorium on approvals.
On a small vegetable farm near where Amazon, Microsoft, AirTrunk and others are building centres, Meg Sun said her family's business had to turn off the sprinklers in the 2019 drought but still bought enough water from Sydney Water to drip-feed the crops.
She worries what might happen if water demand is worsened by data centres' needs in the next drought.
"We can't even run the business then, because we do rely on water," she said.
