Australia's Data Centre Boom: A Warning About Climate Risks

Energy Policy

Thu 18 Jun 2026 at 2:02pm

Data centres are being built quickly in Australia, but their locations need to consider climate risks.

In short

Many planned data centres are in areas at risk from climate change.

As data centres are built in Australia, there are warnings to ensure development does not happen too fast.

What's next?

Energy ministers will meet to decide how to ensure data centre expectations are met.

Australia is a popular place for data centre growth due to its use of artificial intelligence.

The country's strong use of AI, location, and renewable energy make it attractive to investors.

Data centres are important for AI and modern life, but finding locations is a challenge due to climate change.

As data centres are built, governments must ensure development does not happen too fast.

Data centres are being built quickly in Australia.

Data centres in high-risk areas

A company analyzed 2,600 planned data centres and found some were in climate-risk areas.

6% of data centres were at risk of damage or disruption from climate change.

South-East Asia has the most data centres at risk, with 20% already deemed high risk.

The director of science and technology said physical climate risk is an important consideration.

The question is whether data centres can remain operational and economically resilient.

High-risk countries often have frequent natural hazards and poor planning laws.

Some places, like Texas or Florida, may not be sensible locations for data centres.

Australia ranked 22nd for risk, but has one of the steepest increases in risk over time.

Extreme heat poses a challenge for digital infrastructure.

The analysis found extreme heat was a key challenge for data centres in Australia.

Cooling systems are designed for normal temperatures, but temperatures are rising.

New South Wales and Queensland have planned data centres at risk of flooding and bushfires.

Infrastructure around data centres is at risk, including electricity and water supply.

Belinda Dennett says Australia should make the most of its data centre potential.

Australia's data centre appeal

The US is the AI infrastructure capital, but faces capacity constraints and location issues.

Investors are looking for opportunities elsewhere, and Australia has attractive attributes.

Australia has land, renewable energy, and a skilled workforce, making it a popular choice.

The transition to renewable energy is influencing where digital infrastructure is built.

Markets that solve this challenge will benefit from the data centre boom.

Australia is now home to 162 operational data centres, with 90 more in the pipeline.

Investment in data centres has soared from $460 million in 2023 to $6.8 billion in 2026.

Operators look for power availability, fibre cable, and water connectivity when selecting a site.

Melbourne and Sydney are popular areas for data centres, with many being developed.

Some companies use AI models to inform investors and operators about site selection.

AI is being used to make decisions about where to locate new data centres.

There are many steps to get planning approval, which are extremely robust.

Government guidelines

The federal government laid out its expectations for building data centres in Australia.

Operators were encouraged to co-locate renewable energy projects and offset supply.

Operators were instructed to use innovative solutions to minimize water use and build a social licence.

Energy ministers agreed that data centres should fully offset energy with renewable energy generation.

The Australian Energy Market Commission will examine whether laws can be changed.

The federal government wants digital infrastructure to be an asset, not a strain.

Most states agree on the importance of offsetting energy with renewable energy.

Queensland is committed to affordable and reliable energy.

Queensland expects to see details on costs, benefits, and risks before agreeing to any proposal.

Further work is needed before imposing national proposals.

Planners issue warning

The Planning Institute of Australia head said data centres are critical infrastructure.

Greater scrutiny is needed before reaching the approvals phase.

Strategic planning is needed to identify the best locations for data centres.

Renewable energy zones were identified through up-front strategic planning.

Identifying areas with grid connectivity and no climate risk is important.

Nicole Bennetts says more strategic front-end planning is needed for data centres.

Singapore introduced a moratorium on data centre growth, which was later lifted.

Australia does not need to replicate the moratorium, but can map out ideal locations.

Assessing proposals and mapping locations can speed up the assessment process.

Up-front strategic planning gives certainty to infrastructure investors.

Capacity forecast less certain beyond 2030

Data centre capacity in Australia was 1.4 gigawatts in 2025, forecast to exceed 3 GW by 2030.

The capacity forecast beyond 2030 is less certain and dependent on large projects.

Planned data centres create a window of opportunity for strategic planning.

Decisions made today may influence future performance and operational continuity.

Digital infrastructure provides a once-in-a-generation opportunity for Australia to transform its economy.

Australia can export intelligence to the region and build infrastructure for AI creation.

Owning more of the value chain and creating jobs is the opportunity for Australia.

Thu 18 Jun 2026 at 2:02pm

Thu 18 Jun 2026 at 3:33pm

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