The Concerned Waterways Alliance (CWA) has released its February 2026 position paper, Hyperscale Data Centres and Victoria’s Water: Protecting a Public Resource for Communities and Rivers
The paper examines a rapidly emerging issue: the scale of water being sought by hyperscale data centres in a drying, flow-stressed state. It builds on our earlier post in July on the issue.
A Structural Shift in Demand
Victoria has long treated drinking water as a public good, publicly owned, tightly regulated and delivered through protected catchments. At the same time, many rivers, including the Moorabool, Maribyrnong, Barwon, Yarra Birrarung and Latrobe, remain over-allocated and under stress.
The new generation of data centres represents a step-change in industrial demand:
- Facilities operating at 100–300+ MW IT capacity with associated water needs
- Continuous, non-interruptible cooling loads
- Water use measured in gigalitres per year
Even a small number of hyperscale facilities can rival environmental flow recovery commitments under the Central and Gippsland Region Sustainable Water Strategy.
The Policy Gap
Until now Victoria has had:
- No binding water efficiency standards specific to data centres
- No mandatory public disclosure of facility-level water use
- Pricing frameworks not designed for “city-scale” industrial users
Without reform, potable water, which remains comparatively inexpensive, becomes the default cooling source. This risks accelerating augmentation triggers (including desalination), with costs potentially socialised across households.
The paper calls on the Essential Services Commission to ensure that tariffs, scenario modelling and cost recovery frameworks properly account for hyperscale industrial demand.
Ministerial Response and Expert Review
Following completion of the paper, CWA received correspondence from the Minister for Water (26 February 2026).
The Minister reaffirmed that water corporations must protect supply security, that large users are expected to prioritise non-drinking water sources, and that public reporting will apply to users exceeding 100 ML per year. An expert review is underway to assess whether current policy settings remain fit for purpose.
CWA welcomes the transparency commitment and the review. However, expectations to “prioritise” alternative sources are not the same as enforceable requirements, and cumulative demand impacts remain to be clearly addressed.
A Fast-Moving Space
The data centre sector is evolving quickly in scale, density and policy visibility. Early regulatory clarity is essential before cumulative impacts become embedded in tariffs and thwart recovery commitments for our rivers.
It is vital that:
- Mega-users internalise the full costs and risks they create.
- Potable water use should be the exception, not the default.
- That the commitments of returning environmental flows to our most flow stressed rivers not be deferred
Victoria can support digital infrastructure while safeguarding rivers and household affordability but only with enforceable standards, transparent disclosure and independent oversight.
Getting the settings right now will determine whether water remains a protected public resource or becomes a subsidised industrial input.