Data centres are the engine rooms for the modern conveniences we enjoy: sending emails, online shopping, streaming tv shows, cloud storage, navigation apps, and the list goes on. They’re the foundation of our growing digital economy, and are bringing new investment and skilled jobs to Australia. But, data centres also use vast amounts of energy and water, and have other environmental impacts. With record numbers of data centre companies looking to build and operate in Australia to meet growing global AI demand, we need to ensure data centres do not put our shift to clean energy at risk.
Here are eight key things to know about data centres and what they mean for Australia and our shift to renewables.
1. What are data centres?
Data centres are buildings that run all day, every day, to process, store, and manage digital data. They include equipment like servers, routers, switches, firewalls, and storage systems. They can range in size from small sites under 500 square metres, to massive “hyperscale” centres more than 100,000 square metres.
2. How many data centres are in Australia?
There are already more than 250 data centres in Australia. Despite our relatively small population, we are already in the top five locations for data centres in the world thanks to our location and connectivity to Asia, regulatory stability, and renewable energy potential. Data centres are usually near major cities, so they can be easily connected to the electricity grid and to the businesses and government agencies that rely on them.
3. How much energy does a data centre use?
Like their physical size, the energy needs of data centres vary greatly. Typical data centres are around 5-10 megawatts (MW) in size , or use about as much energy as up to 10,000 houses (NB 1 MW is enough to power up to 1000 homes). Emerging “hyperscale” data centres can be up to 1 GW, needing as much electricity as a small city. For example, a 1GW data centre is being planned in Sydney. If it goes ahead, it will be one of the biggest data centres in the world, using the equivalent of almost half the power from Victoria’s Loy Yang A coal power plant, if both ran at full capacity.
In total, Australia’s data centres currently use just over 2% of the power in our main grid. Currently, data centres in Australia source about 40% of their power from renewables either by installing on-site solar or purchasing power through grid-scale projects.
4. How much climate pollution does a data centre create?
Most of the climate pollution from data centres comes from the electricity they use, and along their supply chains. The emissions from energy use depend on a centre’s size, location, and energy efficiency. For example, a data centre in a state with a high share of renewables like Tasmania, the ACT or South Australia, will generally have lower emissions than one in states that rely more on coal and gas. Some data centres are also cutting their climate pollution (and their power bills) by installing their own solar or purchasing clean power.
What are the climate impacts of using AI?
There are growing and valid concerns about the climate and environmental impacts of AI, which is becoming more embedded in our digital lives – in search engines, social media algorithms and voice recognition tools and more – sometimes without us even realising. More people and businesses are also actively using large language model (LLM) tools like ChatGPT.
Research estimates that a typical text-based AI query now uses about 0.2-0.3 watt-hours (Wh). The energy consumed depends on the model used, and increases with the complexity of the query – generating an image may use around 0.5Wh. For comparison, boiling a kettle uses around 100 Wh. The climate pollution from an AI query depends on many factors including the location of the data centre and measures it has in place to improve energy efficiency and use renewable power. Research shows that a typical AI query creates a few grams of carbon pollution.
Should I limit my AI use to reduce emissions?
Firstly, energy use and climate pollution are just two of many factors to consider when deciding whether to use AI tools. Minimising AI use is one thing we can do to reduce emissions, just like eating less meat, riding a bike to work instead of driving, or composting food waste. Ultimately though, meaningful emissions reductions depend on governments and corporations putting in place strong policies and investments that match the scale and urgency of climate change.
5. How can data centres reduce their energy use and climate pollution?
There are many ways that data centres can cut climate pollution, and many are already being adopted in Australia. Many data centre operators in Australia have committed to 100% renewable energy by 2030. Actions they are taking include:
- Directly buying clean power through power purchase agreements (PPAs).
- Co-locating centres with renewable generation and big batteries, to reduce their energy costs and increase energy security while cutting climate pollution.
- Supporting the construction of large wind and solar farms to power data centre operations.
- Installing or upgrading equipment to improve energy efficiency.
Elsewhere around the world, data centres are shifting non-time sensitive tasks to times when large amounts of power are available, to help reduce strain on the grid. They can even use the heat they create to warm homes and businesses, much like many parts of the world already do with geothermal heat.
6. How can data centres help reduce climate pollution in other sectors?
While there are concerns, there are also beneficial climate applications of AI. For example, AI is already being used around the world to detect leaks in oil and gas projects to cut pollution; make manufacturing processes more efficient; drive precision agriculture to reduce fertiliser, pesticide and water use while boosting productivity; and optimise energy use in buildings – for example, smarter heating and cooling can cut energy use by around 10 per cent.Here in Australia, AI-integrated 3D concrete printing is being pioneered to help increase the environmental sustainability of the construction industry, and provide solutions for the housing crisis. The technology can cut construction waste by 60 per cent, production time by 70 per cent and labour costs by 80 per cent. In 2025, the first 3D-printed multi-storey house in the southern hemisphere was built in Melbourne in just five weeks.
7. What are the other environmental impacts of data centres?
Data centres generate a lot of heat and need significant amounts of water for cooling. Some large data centres currently use up to 40 million litres a day – enough for up to 80,000 Australian homes. As southern Australia experiences one of its most severe droughts to date, water resources will become even more limited in some parts of the country in coming years with a changing climate. It’s critical that we manage the growth in data centres without placing extra strain on water supplies.
For example, we should ensure data centres are located in areas with sufficient water supply and infrastructure, and adopt systems that recover, treat and reuse water. New technologies are emerging too. In China, there is already one commercial-scale underwater data centre, and more are being built – using seawater for cooling rather than valuable freshwater. Roughly 40 percent of the electricity consumed by a typical data centre is for cooling – so innovative approaches like this are a win-win.
Data centres can also require significant amounts of land, can create noise pollution which impacts nearby communities and animals, and electronic waste that needs to be appropriately managed at its end of life.
8. How are we going to power the growing number of data centres?
As the world’s second top location for new data centre investment, the rapid growth of data centres will place extra pressure on our grid at a time when demand is already rising as we electrify our homes, businesses and transport. There are varying estimates about how many new data centres will be built in Australia, and how much energy they will need, into the future. Recent research by Baringa estimates Australia’s data centre energy capacity will grow at least four times current levels by 2035.
Analysis shows we will need to bring additional renewable and storage capacity online to meet this rising demand and keep power bills and climate pollution in check. If we build more data centres and don’t bring on new renewables, then we may have to rely on more of our ageing and unreliable coal stations, for longer – putting our energy security at risk. That’s why we have a once-in-a-generation opportunity to develop data centres in ways that support our shift to renewables without negatively impacting power bills, energy security or our environment.
Key energy bodies including the Australian Energy Market Operator (AEMO) and Australian Energy Market Commission (AEMC) are already factoring data centre demand into future grid planning and market rules. The Australian Government requires the data centres it uses to meet strong energy efficiency standards,setting important expectations for the entire industry. Growing pressure from businesses, investors and the community to demonstrate sustainable practices in the face of escalating economic risks and impacts posted by climate change change is reinforcing this trend.
But there is still much more to be done. Greater coordination and leadership is needed to ensure data centres do not put our shift to clean energy at risk.
Australia’s data centre industry must grow in ways that drive the rapid transition away from fossil fuels towards clean, reliable renewable energy at the pace climate science demands. With strong policies and lessons from global best practice, Australia can expand our digital economy while accelerating the shift to renewables.
