NSW government unveils data centre policy framework

The NSW government has issued the NSW Data Centre Policy Framework, intended to ensure future data centre investment is matched by increased investment in renewable energy and water infrastructure.

Under the framework, data centre builders wanting access to a streamlined assessment process will need to comply with the NSW Data Centre Guidelines, which will be reviewed annually.

These guidelines require specific performance resting on six principles, including imposing no net cost to consumers and communities, the funding of additional water and energy supply, and the investment in future industries across the supply chain.

The government said projects meeting the principles will have their development applications assessed within 75 days, while still meeting all planning, environmental and community consultation standards.

The Investment Delivery Authority will also convene an event to connect energy and data centre investors.

Under the pillar in the framework of imposing no net cost to consumers and communities, the NSW Government will make regulatory changes to ensure that data centres pay for the electricity network upgrades they require, so that extra costs aren’t shifted to households and small businesses; support more coordinated and efficient planning of the electricity network; and
support implementation of the measures in the Guidelines.

The government have introduced legislation to enable these reforms and begin consultation on the detailed implementation today.

The NSW Government is commissioning IPART to undertake a review of the water pricing framework for data centres.

The review will consider how water pricing can reflect the full costs associated with servicing data centres, ensuring other water users on the network are protected and the impacts of drought and water scarcity are appropriately managed.

Alongside the framework, the NSW government is also establishing an Office of AI within the Cabinet Office. The Office of AI will work closely with Digital NSW, the government said, adding it will also continue to work with the Australian Government and other states and territories to ensure future reforms to establish a nationally coherent policy framework.

This follows on from the government establishing an Office ‌of ‌AI within the Department ‌of the Prime Minister and Cabinet in July to manage the development of artificial intelligence standards and force data centres to be net producers of energy and limit their water usage,

The NSW government said there are 19 data centre projects valued at $50.3 billion in the State Significant Development pipeline; this is in addition to more than 60 data centres that are already operating or under construction.

Minister for Planning and Public Spaces Paul Scully said data centres are the enabling infrastructure for modern economies and communities.

“These Guidelines provide clear expectations, improving transparency and providing certainty for both communities and investors," he said.

“We’ve struck the right balance, maintaining strong environmental standards to safeguard our water and energy future while supporting faster and more certain planning assessments for data centres which protect the interests of communities while delivering them benefits.”

Jarrod Nink, MD of Equinix Australia, said the company welcomes the NSW Government’s focus on ensuring the growth of digital infrastructure is sustainable and delivers benefits for the broader community.

"We believe effective policy settings can and should support both objectives, expanding NSW’s digital capacity while encouraging investment in renewable energy, greater energy efficiency, and more sustainable technologies," he said.

"Equinix looks forward to engaging directly with the NSW Government and relevant stakeholders as policy develops and contributing our experience as an operator with a proven sustainability track record to help shape practical effective outcomes for the state."