The NSW Government has unveiled a new policy framework which aims to support responsible investment in data centres.
There are currently 19 data centre projects valued at $50.3 billion in the State Significant Development pipeline, in addition to more than 60 data centres that are already operating or under construction.
Minister for Planning and Public Spaces, Paul Scully said the NSW Data Centre Policy Framework will make sure future data centre investment is matched with increased investment in renewable energy and water infrastructure.
“Data centres are the enabling infrastructure for modern economies and communities,” said Mr Scully.
“These Guidelines provide clear expectations, improving transparency and providing certainty for both communities and investors.
“We’ve struck the right balance, maintaining strong environmental standards to safeguard our water and energy future while supporting faster and more certain planning assessments for data centres which protect the interests of communities while delivering them benefits.”
The Government says the framework establishes clear expectations for data centre proponents, with world-class energy, water and environmental standards, meaningful community consultation and appropriate contributions towards the infrastructure needed to support growth.
The framework includes:
The NSW Data Centre Guidelines
Under the new framework, data centre builders wanting access to a streamlined assessment process will need to comply with the NSW Data CentreGuidelines.
They require specific performance measures to achieve six principles:
- Apply world-class environmental and efficiency standards
- Impose no net cost to consumers and communities
- Fund additional supply of water and energy
- Enhance local community infrastructure and amenity
- Invest in future industries across the supply chain
- Demonstrate a commitment to training and skills to support jobs.
Projects that meet the performance measures associated with the above principles will receive a commitment to have their proposed developments assessed within 75 days, while still meeting all planning, environmental and community consultation standards.
This commitment is supported by concurrent changes being made to Independent Planning Commission processes to further streamline key project assessment.
The Investment Delivery Authority will also convene an industry collaboration event to connect energy and data centre investors.
The Guidelines will be reviewed annually to ensure they remain fit for purpose and reflect advances in technology and changes in the industry.
Regulatory reform to ensure equitable cost recovery for energy infrastructure
Under the second pillar of the framework, the NSW Government will make regulatory changes to:
- ensure that data centres pay for the electricity network upgrades they require, so that extra costs aren’t shifted to households and small businesses,
- support more coordinated and efficient planning of the electricity network, and
- support implementation of the measures in the Guidelines.
We have introduced legislation to enable these reforms and begin consultation on the detailed implementation today.
An IPART review to consider the full recovery of costs of water provision to data centre customers
The NSW Government is commissioning IPART to undertake a review of the water pricing framework for data centres.
The review will consider how water pricing can reflect the full costs associated with servicing data centres, ensuring other water users on the network are protected and the impacts of drought and water scarcity are appropriately managed.
Office of AI
Alongside the NSW Data Centre Policy Framework, the Government will establish the new Office of AI in The Cabinet Office to strengthen and accelerate the response to the opportunities and challenges presented by artificial intelligence.
The new Office of AI will work closely with Digital NSW, which will continue to lead coordination of government investment in the digital, cyber and data foundations needed to support AI adoption. It will also work with public sector unions to ensure AI supports workers, strengthens capability and is implemented responsibly across the public sector.
“Artificial intelligence is increasingly part of our everyday lives and we have a strong framework within the NSW Government to ensure it is used safely and responsibly,” said Minister for Customer Service and Digital Government, Jihad Dib.
“We are building on these strong foundations through a whole of government approach and Digital NSW will work closely with the new Office of AI to support NSW to safely navigate emerging AI technologies and harness new opportunities to benefit the community.”
The NSW Government says it will continue working closely with the Australian Government and other states and territories to ensure future reforms establish a nationally coherent policy framework.
Investment in the sector in NSW has been increasing at around 75% per year on average over the three years to December 2025.
Treasurer Daniel Mookhey said the scale of data centre investment being considered in NSW presents a unique opportunity.
“Data centres need power and there are renewable projects seeking investment,” he said.
“Connecting the two means this booming digital industry can help pay for the new energy and water infrastructure that our economy needs.
“This world-class framework provides the certainty that both investors and – importantly – the community need.
“NSW is a premium destination, so we are setting a high bar.”
