31 March 2026
2 min read
#Digital Economy, #Renewable Energy, #Construction, Infrastructure & Projects
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Last week, the federal government announced the national interest framework for data centres and AI infrastructure. Key expectations emerging from the framework include aligning data centre projects with national interests, support for the energy transition, sustainable water use, and investment in local capability and the workforce.
Within days of the framework’s release, the NSW Government issued its own Data Centre Consultation Paper, outlining a principles‑based framework to guide the rapid growth of data centres and AI infrastructure in NSW. The paper responds largely to increasing pressure on the state’s energy and water resources, with reference to the proposed pipeline of hyperscale data centres and anticipated rise in demand for resources. It also seeks industry feedback on how the practical implications of data centre development aligns with the government’s intended regulatory and legislative goals.
As Australia grapples to position itself as a hub for regional AI infrastructure, Sydney is already one of the largest data centre markets in the region, with tens of billions of dollars of committed capital for future projects in the existing pipeline. The NSW Government has also recognised the sector’s importance as a job provider and contributor to economic growth. With critical infrastructure in project development and resources needing protection, state-based legislators must ensure state interests remain at the forefront.
Of particular note was the NSW Government’s announcement last week that 15 data centre projects will be progressed through the NSW Investment Delivery Authority (IDA), an authority established to fast-track major investment projects. Some interesting data for NSW was also released, including that $51.9 billion in IDA endorsed projects under investment and data centre projects now accounting for approximately 12% of all non-residential building investment in the state. It is also noteworthy that the IDA did not endorse around $40 billion worth of projects that were considered too speculative or lacking in preparedness.
Given the significant interest in the sector’s growth, it is vital that regulatory bodies and governments at all levels align to ensure national and state interests are protected. With hyperscale data centres under development, and some projects already well advanced in the planning approval process, the risk to energy and water resources are increasing with each approval. While the investment is no doubt welcome economically, the need to ensure projects are regulated for longer term sustainability and local interest protection will continue to come under significant scrutiny.
The NSW Data Centre Consultation Paper is open for public consultation until Friday, 8 May 2026. Those interested can submit their feedback here.
If you have any questions regarding the national interest framework or this article, contact us here.
Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.
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