Dozens of approved but yet-to-be-built AI data centre projects will escape the federal government's proposed restrictions on energy and water use because the new rules are not expected to be retrospective, according to an ABC News analysis of planning records and company documents. The analysis reveals that the new generation of data centres will be significantly larger and more power-hungry than existing ones, with a combined computing capacity of at least 2.9 gigawatts — nearly double the 1.5 gigawatts of the 162 centres already operating across Australia as of March this year.
Prime Minister Anthony Albanese announced earlier this year that the federal government would create Australian standards for AI data centres to address community environmental concerns while attracting investment from major tech companies. The government aims to pass a law establishing these rules by early 2027. However, the uncertainty has not slowed development, with business welcoming the tens of billions of dollars being invested in the physical infrastructure powering the generative AI boom.
ABC analysis of upcoming projects includes developments from Amazon Web Services, Microsoft, AirTrunk, CDC and NEXTDC, as well as property groups Goodman and Stockland. The list was verified by analysts from commercial renewable energy project mapper RenewMap and real estate construction analytics firm CBRE.
One project approved last week is property developer Goodman's five-storey data centre Project Apollo in Sydney's north. It will take two years to build and be one of Australia's biggest data centres by computing capacity if it existed today, according to the facility's proposal. While not subject to the federal government's rules, its approval came with conditions from the NSW government relating to water and energy use.
RenewMap co-founder and director Alex Thompson said the development pipeline had accelerated in recent months, with proposed centres generally much larger than those already operating. He said NSW and Victoria were the main growth areas, particularly western Sydney and Melbourne's outskirts, while developers were also pursuing regional locations alongside wind, solar and battery projects.
Not all of the approved data centres will likely be built, the article notes.
Analysis
Why This Matters
- The new data centres will consume substantial energy and water at a time when Australia is transitioning its energy grid and facing drought pressures.
- The non-retrospective approach means the most power-hungry facilities — those approved before the rules take effect — will operate without federal environmental constraints for years.
- This creates a gap between government policy ambition and actual environmental impact, potentially undermining community confidence in AI regulation.
Background
In July 2026, Prime Minister Albanese announced the federal government would create Australian standards for AI data centres, aiming to quell community concerns about the environment while attracting tech investment. The proposed law is expected to pass by early 2027. However, the government has indicated the rules will not apply retrospectively, meaning projects already approved — including the 25 identified in the ABC analysis — will not be subject to the new restrictions. State governments, such as NSW, have imposed their own conditions on some projects, but there is no national framework yet.
Key Perspectives
Tech companies and developers: They welcome the investment and argue data centres are essential for the AI boom. They point to tens of billions of dollars flowing into Australia and note that state-level conditions already address some environmental concerns.
Environmental groups: They have raised concerns about the pressure AI data centres place on the energy transition and water resources. The non-retrospective rules mean the largest, most power-hungry centres will escape federal oversight.
Critics/Skeptics: Some analysts question whether all approved centres will actually be built, given the rapid pace of approvals and potential market shifts. There is also concern that federal rules may be too weak or slow to address the scale of growth.
What to Watch
- The passage of the federal data centre standards law, expected by early 2027.
- Whether state governments like NSW impose stricter conditions that effectively regulate the centres that bypass federal rules.
- The actual construction rate of the 25 approved projects — not all may proceed, which could change the environmental impact profile.