Data centre operators throughout Australia have a significant opportunity to help to address the nation’s energy, water and community challenges, a leading researcher says.

During a recent interview with Sourceable, Professor Priya Rajagopalan, Director of the Post Carbon Research Centre for Infrastructure and the Built Environment at the Royal Melbourne Institute of Technology (RMIT), said that there are opportunities for data centres to move from being  mass consumers which suck up energy and water resources to instead becoming critical players in delivering benefits for communities and the environment.

The interview followed an address on green data centres which Rajagopalan gave in October at Austrade’s Opportunities in Critical Technology in Australia event.

During that presentation, Rajagopalan called for governments, industry and researchers to work together to create sustainable and mutually beneficial outcomes for data centres and local communities.

“The question is no longer whether we need data centres, but how we plan, locate, and govern them to ensure their co-existence with communities,” she said.

Construction boom

Rajagopalan’s comments come as Australia is undergoing a boom in new data centre development.

A data centre is a dedicated physical facility which houses IT infrastructure such as servers, storage and networking equipment. These act as the backbone for storing, processing and distributing digital data and applications that power everything from cloud services and AI to online banking.

The centres form a backbone from which many of our streaming services, financial and government systems are supported.

Already, Australia has 283 data centres which are listed on a database maintained by the web site Data Centre Map.

Of these, 97 are in Sydney whilst a further 55 are in Melbourne.

At its Construction Outlook conference held in September, Oxford Economics Australia indicated that new data centre development is ramping up.

In 2024/25, the value of new data centre developments on which construction commenced came in at around $2.5 billion. This represents a more than fivefold increase compared with annual investment levels that were recorded prior to COVID.

Going forward, Oxford is tracking almost $100 billion worth of mooted projects across the sector.

Huge impact

Despite their importance, data centres have become a source of concern in terms of their effect upon energy grids, water networks and local communities.

This is being driven by their massive energy and water requirements.

Within data centres, servers and equipment run non-stop for 24 hours per day.

Even performing relatively straightforward tasks such as search queries requires substantial power. Such tasks also generate heat which creates a need for water to cool the equipment in order to prevent damage.

Over recent times, the effect of this has been supercharged on account of the growth of artificial intelligence (AI). This is the case as AI tasks are many times more complex compared with basic searches.

This has led to IT equipment within the centres becoming heavier and more densely packed. In turn, this is leading to more power consumption and a greater need for water to cool equipment which is now getting even hotter.

Effects are significant.

By 2040, the Australian Energy Market Operator believes that data centres will consume around 12 percent of all power generated nationally.

In terms of water, meanwhile,  Sydney Water is preparing for data centres to use up to 25 percent of the Sydney Metropolitan area’s drinking water supply by 2035.

Each of the city’s existing data centres currently draw from public drinking water supplies.

All this, Rajagopalan says, means that potential impacts from data centres could include:

• Greater pressure on the resilience of energy and water networks, and the need to ensure that data centres do not compromise the ability of utility networks to cater for households and other commercial or industrial users.
• Potential cost implications for other energy users including households if energy providers are forced to invest in additional infrastructure to cater for data centre demand.
• Potential implications for Australia’s climate targets on account of the sector’s carbon footprint.
• Potential localised impacts such as noise, microclimate effects or biodiversity degradation in cases where poorly designed centres are located close to residential communities.

(Nature positive design such as rooftop gardens is one way data centres can contribute to local biodiversity and sustainability. Image: AI generated via freepix.)

Design considerations

From a design perspective, this leads to several considerations.

As with other buildings, energy modelling is needed to predict and optimise energy consumption. This must account for future demand and climatic conditions.

In the case of data centres, however, additional analysis is needed to separate hot and cold isles. This is needed to avoid compromising energy performance by mixing hot and cold air.

This necessitates additional airflow analysis to ensure maximum efficiency through hot air/cold air containment.

A further consideration involves the type of cooling system which is used.

Often, this involves cooling the air through either evaporative cooling or use of a traditional chiller system.

Alternatively, some data centres opt for liquid cooling. Rather than cooling the air, this involves using a coolant to cool the chips in the IT equipment directly.

Each method has advantages and drawbacks.

With evaporative cooling, for example (which involves water being sprayed from cooling towers to cool the air), a significant volume of water is lost during the evaporation process.

By contrast, cooling via chillers does not lose water through evaporation but is nonetheless water intensive in its use.

NABERS rules to deliver transparency

In terms of energy performance, new government regulations which commenced in the middle of this year require all data centres which provide services to the Australian Government to achieve a five-star rating under the National Australian Built Environment (NABERS) rating system.

The directive is part of the Net Zero in Government Operations Strategy.

According to Rajagopalan, this will deliver important transparency surrounding the energy performance of data center operations.

This is important as claims about the environmental credentials of individual data centres are currently difficult to verify.

However, she adds that there is an opportunity to develop metrics which are specific to data centre buildings as these are different from commercial or institutional buildings.

From impact to positive opportunities

Despite their impact, Rajagopalan says that data centres could become part of the solution to environmental and community challenges.

Potential strategies could include:

• Feeding backup power into the grid. On top of grid energy, many data centres maintain their own independent sources of energy and backup storage. This can include on-site renewables, diesel or gas back-up generators as well as battery and thermal storage solutions. Potentially, unused power from these sources could be fed back into communities to cover periods of peak energy demand.
• Making waste heat available to nearby communities. In cases where data centres are located next to community facilities such as swimming pools, low grade waste heat generated from the data centre operations could be used to heat these facilities.
• Water saving measures such as locating data centres close to sewers to enable use of recycled water for data centre operations.
• Enhancement of local biodiversity through site planning and nature-based solutions.
• On-site rainwater capture, treatment and storage to enable reuse either for the center’s cooling operations or for nearby local community amenities.

(Rainwater capture, treatment and reuse can help data centres to reduce the impact of their use of water resources.)

Leadership needed

At a broader level, Rajagopalan says that traditional urban and master planning approaches need to evolve.

Historically, planning approaches have focused on normal levels of energy and water requirements for expected population growth.

In light of AI, however, these approaches are no longer adequate and need to be revisited.

Instead, Rajagopalan calls for a coordinated response.

This should include input from:

• governments at all levels (federal/state/local) and across various functions (energy, water, finance etc.)
• the technology sector
• design and planning professionals such as architects, engineers and urban planners; and
• researchers and academia, who can provide the evidence base upon which decisions can be made.

This should be coordinated by government, which has the power to bring the various stakeholders together.

Rajagopalan says that benefits of doing this will be substantial.

“In a dynamic energy system, forward-looking policies can steer the industry toward sustainability rather than crisis management,” she said.

“There are excellent opportunities for collaboration among federal, state, and local governments; regulators; grid operators; water utilities; communities and other stakeholders to address these issues collectively.”