While Big Tech and many politicians are presenting the unprecedented growth of data centres as an inevitability, or even a necessity, the truth is that this energy- and water-thirsty industry threatens to throw our energy transition off course.
Last month, Friends of the Earth made a submission to the NSW Parliamentary Inquiry into data centres, which is considering the scale, impacts and implications of data centre development in New South Wales.
AEMO is forecasting that data centres will consume 11% of NSW electricity by 2030, drastically increasing energy demand. The 22 data centre applications received in the first quarter of this year alone represent a combined demand of 3.67 gigawatts - enough energy to power 1.1 million NSW homes.
Australians are rightly concerned about the dominance of AI and want to see stronger regulation of AI industries to protect public interest. But there is little regulatory oversight currently in place to manage the growth of this new industry and its impacts on people, energy and water.
Some data centre developers are proposing new, on site gas-fired generation to power them, and even those that propose they will be powered by renewables require so much power that new renewable energy generation coming online will be consumed by data centres and will no longer be available to replace coal-fired power in the grid.
This industry is already being used as justification to prolong the life of coal-fired power stations and new gas extraction. It is hard to see how NSW will meet its renewable energy and emissions reduction targets with enormous, power-hungry data centres eating up all the new generation from solar and wind, and building new gas to boot.
When it comes to water use, one large data centre can consume up to 5 million gallons per day - equivalent to the water use of a town populated by 10,000 to 50,000 people. Across Australia, data centres are estimated to consume 47 billion litres of water a year and some reports indicate that AI use could require the equivalent of 25% of Sydney’s drinking water by 2050.
Data centres also contribute little, if any, social benefit. They are hot, noisy, securitised and windowless concrete boxes, take up vast blocks of land that could otherwise be used for housing or essential services, and they are being built without regard for community concerns or community benefit. In Western Sydney, where multiple new data centres are proposed, temperatures are routinely up to 10 degrees higher than other parts of the city - urban heating which will only be super-charged by new data centres emitting temperatures between 35°C and 45°C day and night.
Communities in the US - and now in Australia - are pushing back against data centres that offer no social benefit but put pressure on energy, water and land resources. These are essential resources that should be enjoyed by communities, not AI.
That is why we are calling for a moratorium on data centre development until the NSW government thoroughly assesses the social, climate and environmental costs of hosting this new generation of data centres, and develops clear policy and regulatory frameworks to make sure that Big Tech corporations cannot pocket massive profits from NSW resources at the expense of communities and the climate.
Read our full submission to the NSW Inquiry here.
References:
Australian Financial Review, Paul Karp, ‘The Sydney suburbs that will house $52b of power-hungry data centres’, 27 March 2026.Environmental and Energy Study Institute, Miguel Yañez-Barnuevo, ‘Data Centers and Water Consumption’, 25 June 2025.Sydney Morning Herald, Andrew Taylor, ‘Thirsty data centres threaten to delay thousands of new homes’, 17 August 2024.Cyber Daily, Daniel Croft, ‘AI’s true blue: Aussie AI could be skulling 25% of Sydney’s drinking water by 2035’, 28 August 2025.Renewable and Sustainable Energy Reviews, Xiaolei Yuan et al, ‘Waste heat recoveries in data centers: A review’, October 2023.