The Australian Government has this week released its Expectations of Data Centres and AI Infrastructure Developers, alongside the earlier National AI Plan.
At first glance, this is a welcome development. It signals that government is beginning to recognise that hyperscale data centres are not just an energy issue, but a water issue.
Number 3 of the 5 expectation announced Monday focused on sustainable and efficient water use. It contains several elements that are both sensible and necessary. It calls for efficient cooling technologies, the use of non-potable water where possible, engagement with water utilities and communities, cost recovery for infrastructure, and transparent reporting of water use.
Expectation 3 – Sustainable and efficient water usage
Data centres should use innovative, efficient and sustainable solutions to minimise water use. They should engage early and work proactively with water utilities, communities and First Nations peoples to determine appropriate locations and use secure water sources based on local conditions. They should use efficient cooling technologies, and where possible use non-potable water and apply circular water opportunities. To minimise adverse effects, data centres should:
- cover their share of infrastructure and delivery costs
- build resilience into operations to mitigate the impacts of water disruptions, drought and climate change
- provide ongoing transparent reporting about their water usage and efficiency.
These are all principles that the Concerned Waterways Alliance has consistently supported including in its position paper.
However, the key question is not whether these ideas are sound but whether they will actually change outcomes on the ground and make a reasonable contribution to ensuring sustainable water use in this burgeoning, water intensive industry.
At present, there is little to suggest that they will.
The guidance is framed almost entirely in terms of what data centre developers “should” do. There are no binding requirements, no minimum performance standards, no reporting obligations with regulatory consequence, and no clear link to planning or water allocation decisions. In practical terms, this means that the framework relies on voluntary uptake by operators whose commercial incentives may not align with minimising potable water use. It should be noted that the expectations aren't in a published document, but rather it is simply a page on the Department of Industry, Science and Resources website.
Where large, continuous water demands are involved, and preferred a way of saving on energy costs is to use staggering amounts of water, outcomes will not usually be determined by 'should's. They will instead be determined by rules.
The lack of attention on water in the supporting document the National AI Plan reinforces this gap. Its references are brief and largely illustrative, highlighting an example of an efficient system with closed-loop cooling. While this example demonstrates what is technically possible, they do not establish what really should be required across the sector as a whole.
Victoria is already grappling with the challenge of recovering water for stressed rivers while managing population growth and climate variability. Against that backdrop, the full impact of this new class of high-volume, industrial-scale water users has to be faced head on.
In response to the Federal government's 5 expectations the Concerned Waterways Alliance offers the following five principles which we deem are needed to guide the sustainable integration of data centres into Victoria’s water system. Some align with the government's but speak directly to what we believe meaningful expectations should detail.
The first is that potable water must be treated as a resource of last resort for industrial cooling. Where viable alternatives exist, including recycled water, stormwater substitution, and closed-loop systems, these should be prioritised.
The second is that enforceable water efficiency standards are required. Leading facilities have demonstrated that very low water use is achievable. Policy should reflect best practice, not average practice.
The third is transparency. Facility-level reporting of water use, source, and efficiency must be mandatory and publicly accessible. The Victorian government has at least confirmed that all large 100ML/yr users will be detailed in the annual reports of water authorities.
The fourth is cost allocation. Where data centre demand drives infrastructure upgrades or increased reliance on climate-independent supplies, those costs must be borne by the users creating them—not by households or the environment.
The fifth is cumulative impact. Planning and water allocation decisions must consider the combined effect of multiple facilities within a region, rather than assessing each proposal in isolation.
These principles are not intended to slow investment or discourage innovation. They are intended to ensure that growth in digital infrastructure does not come at the expense of already stressed waterways or the long-term resilience of urban water systems.
The Federal government’s guidance is a useful starting point but that is it.
It will now take clear, enforceable settings at the state level to ensure the Federal government's well-intentioned but relatively toothless expectations translate into measurable outcomes on the ground.
Victoria has an opportunity to get ahead of this issue. The Concerned Waterways Alliance urges it to do so with urgency.