Victoria has set a new development framework for data centres that will require new projects to match their electricity demand with new renewable generation and storage, use non-drinking water for cooling and keep clear of residential areas.
The Sustainable Data Centre Action Plan, released on 22 September, turns the state’s fast-growing digital infrastructure pipeline into a more explicit set of obligations covering energy, water, planning, traffic, workforce and community benefits.
For developers and infrastructure investors, the biggest change is the requirement that new facilities bring new power supply with them rather than relying on existing generation. Operators will also be expected to meet connection costs and network upgrades associated with their projects.
Energy and water move to the front of the development case
The Victorian Government says the data-centre sector delivered about A$5.8 billion in capital expenditure into the state last year. As artificial intelligence and cloud workloads increase, the power required by future facilities is expected to rise sharply.
Under the new framework, that load will have to be matched with new renewable generation and storage. The policy is designed to reduce the risk that data-centre growth adds pressure to household and business electricity costs.
Water use is also being tightened. New facilities will be required to use recycled or non-drinking water for cooling. Where that cannot be achieved immediately, operators will have to offset drinking-water use and fund infrastructure upgrades needed to support the project.
Planning buffers and local contributions
New data centres will be prohibited in residential zones and will not be permitted near schools and childcare centres or in rural locations that cannot support them. A 150-metre buffer will apply between new data-centre buildings and homes, while developers will also need responsible traffic-management plans for construction and operations.
The state will additionally apply a Local Investment Guarantee. Contributions will be determined through consultation and could include local jobs, training, TAFE support, parks and other community infrastructure.
Existing applications already under assessment will not be subject to the new settings.
The move adds a state-level layer to the broader national debate over how Australia should accommodate large AI and cloud infrastructure. BWA recently examined the Commonwealth’s proposed mandatory AI data-centre standards and the accelerating regional data-centre investment pipeline.
Source notes: Victorian Government, “We Need Data Centres But We Set The Rules”, 22 September 2026; Department of Jobs, Skills, Industry and Regions, Sustainable Data Centre Action Plan.
