The Victorian Government has released its new Sustainable Data Centre Action Plan, setting out rules for the rapidly expanding data-centre industry across energy, water, planning and community impacts.
For the Concerned Waterways Alliance, the Plan represents a substantial change in the policy landscape. Many of the water issues CWA has been raising since 2025 are now explicitly recognised including the potentially enormous scale of future demand, the need to move cooling away from drinking water, mandatory water-efficiency measures, greater transparency, and the principle that data-centre developers, rather than households, should bear the infrastructure costs they create.
These are significant steps forward and should assist in better protecting the State's critcal water resources and to some extent our suffering waterways.
But beneath the Government’s headline commitments there are significant gaps that need to be addressed.
The scale of the issue is now on the record but still understated
One of the most important parts of the Action Plan is its acknowledgement that the water issue is not primarily about today’s data centres, but the much larger generation now coming on stream.
"Data centres draw less than 1% of potable drinking water
across the Melbourne and Geelong networks. In Greater
Western Water's service area, 13 of 15 facilities used
33 megalitres combined over the past year"
"Greater Western Water is assessing 19 data centre
applications seeking a combined 19,714 megalitres a year
– roughly 4% of Melbourne's supply."
The CWA does feel it appropriate to note the way these figures are presented has the effect of understating the scale of the emerging water demand because the comparisons are not like-for-like. The headline figure that existing data centres using “less than 1 per cent” of drinking water across Melbourne and Geelong describes today’s consumption across a very large supply system, while the much larger prospective figure of 19,714 ML a year relates only to applications within Greater Western Water’s service area.
The 4 per cent comparison also uses Melbourne’s total current supply as its denominator, rather than the supply available within Greater Western Water’s own system. Most importantly, the 19.7 GL figure does not include proposed data centres seeking water from Melbourne’s other water corporations. The result is a set of technically valid statistics that are drawn from different geographic areas, timeframes and denominators, making the current impact appear reassuringly small while obscuring the potentially very different scale of future demand.
Additionally the Action Plan does not use the word “hyperscale” at all, despite the Victorian Government previously using it elsewhere to describe the sector. Treating all “data centres” as a single category risks blurring the fundamental change in scale now occurring.
“The right amount is zero”
Setting aside the concerns above, the Premier’s announcement contains perhaps the strongest statement yet from the Victorian Government on data-centre water:
“Data centres currently use less than 1 per cent of Victoria’s drinking water for cooling, but the right amount is zero.”
The Government says new data centres will use recycled or non-drinking water for cooling, and where that cannot be achieved immediately they will need to offset their use and pay for required infrastructure upgrades.
CWA welcomes that direction.
The Action Plan introduces Water Usage Effectiveness (WUE) standards, requires public reporting aligned with national standards, requires facilities using drinking water to be capable of reducing consumption during drought, and requires developers to meet the cost of infrastructure needed to service their facilities.
These measures respond directly to issues CWA raised in its February position paper and subsequent submissions including the absence of binding efficiency standards, poor public visibility of facility-level water use, and the danger that comparatively cheap drinking water could become the default cooling source for a new generation of enormous industrial users.
But drinking water has not entirely been ruled out
The problem is that the detailed framework does not yet make the Premier’s “zero” ambition an immediate requirement.
Water-intensive facilities are “expected” to use recycled or other non-drinking water, but they can instead enter an agreement with their water corporation to transition when alternative supplies become available. The Plan explicitly allows drinking water to be used in the interim and unfortunately there is no specified maximum transition period, no maximum volume of interim potable use and no date by which drinking-water cooling must cease.
If “zero” is the destination, CWA believes the implementation framework needs a clear pathway for getting there.
Non-drinking water is not automatically environmentally sustainable
CWA’s concern has been where additional water ultimately comes from.
Any raw-water diversion from a stressed river, or additional groundwater extraction from a system supporting groundwater-dependent ecosystems, may technically be “non-drinking water” while still increasing pressure on the environment. Even recycled water which may have allowed for drinking water substitution in the future, and therefore present an opportunity to ease pressure on stressed waterways, may now be foregone.
CWA therefore continues to support a clear hierarchy of minimise water consumption through efficient and closed-loop cooling wherever practicable; mandate recycled water and genuinely additional rainfall-independent supplies; and ensure that any use of surface water or groundwater is temporary and assessed against ecological limits.
Transparency, efficiency and reporting
"Design to dWUE ≤ 1.0 (potable)
or ≤ 1.6 (non-potable), otherwise
agreed with the water corporation.
Measured in line with ISO/IEC
30134-9:2022. Standards reviewed
and updated annually. Publicly
report water use, aligned to
national standards."
The Water Use Efficiency (WUE) requirements are certainly welcome, but mainly apply to those using evaporative cooling, something which should be disallowed given there are technologies which permit very little water use. The new WUE requirements also unfortunately do not apply to existing centres, or those being currently built, or those currently going through and approval stage.
To illustrate the scale involved, if the proposed 2.4 GW Plumpton facility in outer Melbourne were ultimately operating at full IT load with a WUE of 1.0 litre/kWh, its theoretical cooling-water consumption could be about 21 GL a year. If the quoted 2.4 GW instead represents total facility load, a PUE of 1.25–1.3 would imply roughly 16–17 GL a year. Actual use would of course depend on utilisation, cooling technology and the precise meaning of the project’s stated 2.4 GW capacity. However it is sobering to think that is broadly comparable with the 19.7 GL/year sought by all 19 data-centre applications currently before Greater Western Water combined. At the Victorian Government’s proposed recycled-water design standard of dWUE 1.6 L/kWh, a fully utilised 2.4 GW data centre could theoretically require around 33.6 GL of recycled water a year or if 2.4 GW represents total facility load, the figure would be around 26–27 GL a year at a PUE of 1.25–1.3.
Publicly reporting of water use can not be left up to the current system. The Water Act 1989 as it stands requires water corporations to publish the number of customers who are using 100 ML or more water per year. This is normally in the form of a simple list such as the one below from Greater Western Water Annual report 2024–25.
This is not the required level of transparency that the public is demanding for data centres. It needs to be facility level and measured against designed usage.
The missing piece: environmental water
Perhaps the most significant omission from the Action Plan is an explicit safeguard for environmental-water recovery.
Victoria has major outstanding commitments to return water to stressed waterways under the Central and Gippsland Region Sustainable Water Strategy. At the same time, climate change is reducing inflows and population growth is creating major new demands on Melbourne and Geelong’s water systems.
The Action Plan appropriately protects households and existing customers. But it does not clearly state that new data-centre demand must not delay water already promised to rivers.
For the CWA, this remains a high priority.
When additional desalinated, recycled or other climate-independent water is created, it should not simply disappear into new industrial demand. Some should enable environmental water recovery for our flow stressed systems.
“Replace what you use” needs stronger rules
The Plan introduces a promising principle: where drinking water must temporarily be used, proponents should “replace what you use.” But the proposed mechanism allows water corporations to accept funding agreements or water-efficiency programs as offsets.
However does one gigalitre consumed require one gigalitre of genuinely additional supply? Must savings be additional to programs that would have happened anyway? Who verifies them and for how long must they persist has not been explained.
An offset on paper is not necessarily another litre of secure water in the system.
Data centres must pay the full cost they create
CWA also welcomes the requirement that developers fund water infrastructure needed to connect their facilities and contribute where their demand brings forward augmentation that other customers would otherwise have funded later.
But connection costs are only part of the equation.
If major industrial demand brings forward additional desalination, advanced recycling or other climate-independent supply, the marginal cost of providing that water should also be identified and recovered from that demand rather than quietly averaged across household bills. This is on of the reasons why the CWA has been such a strong advocate of a data centre specific tariff to ensure the protection of household water bills.
Also the neighbouring NSW guidelines go further in explicitly contemplating take-or-pay contracts, forward capital contributions and other commercial arrangements designed to protect existing customers from stranded infrastructure costs.
Victoria should consider similar safeguards.
A strong commitment to public consultation
"Proactive Engagement: In addition to standard statutory public consultation requirements,
proponents of all data centre projects, including those accelerated through the Development
Facilitation Program, must actively engage with local communities, First Peoples, and host
municipal councils both prior to and throughout the approval process."
CWA welcomes this commitment but that consultation and transparency needs to include the projected water use, something which in the past has only been revealed post planning approval.
Also welcome was the inclusion of the General Environmental Duty.
"General Environmental Duty: The General Environmental Duty under the Environment
Protection Act 2017 binds every facility operator, with no minimum threshold. Proponents are
expected to proactively identify and minimise adverse environmental impacts, including risks
to native vegetation, waterways, and land, during the initial site selection phase, rather than
attempting to mitigate poor locational choices during the formal assessment process."
This is particularly important to the issue of the waste water discharges from data centres going back to treatment plants for disposal, often via discharges into waterways. Many of these waterways are suffering from low flow regimes and the concentrated discharges from data centres risk ending up being an increasing proportion of the river's flows.
A welcome shift but with more work to do
CWA is not opposed to data centres or AI. Digital infrastructure is increasingly important to modern life and the economy.
The issue is whether its growth occurs within Victoria’s water limits.
The Sustainable Data Centre Action Plan is an important advance. It recognises that hyperscale data centres are a water-planning issue as well as an energy issue, introduces standards where few existed before, and establishes a much clearer expectation that the industry should use alternative water and pay the costs it creates.
But the next stage will be critical as will acceptance of this or greater standards by all parties in the upcoming State election.
CWA will continue to advocate for enforceable limits on drinking-water use, genuine additionality for offsets, full-cost pricing, facility-level transparency, cumulative regional assessment and, critically, a guarantee that new industrial demand will not push the recovery of Victoria’s stressed rivers further into the future.
Victoria can have a growing digital economy and healthier rivers. But only if new demand doesn't compete for the water our communities and waterways already need.
For more information please visit our data centre page at: https://concernedwaterwaysalliance.org/the-data-centre-page/