They’re quiet from the outside. No smokestacks, no roaring machinery. Just vast, windowless warehouses humming away. But behind those walls, Australia’s datacentres are consuming more power and water than ever — and the consequences are starting to draw scrutiny.
Australia is already home to around 260 datacentres, mostly clustered in Sydney and Melbourne, with dozens more in development. The rapid growth is being fuelled by artificial intelligence, cloud computing and our increasingly digital lives. Every streamed movie, online meeting, AI prompt or banking transaction passes through these facilities. It feels invisible. It isn’t.
Power Demand Is Rising Faster Than Expected
At present, datacentres account for roughly 2% of electricity demand on the national grid. That might not sound alarming. But according to the Australian Energy Market Operator (AEMO), that share could triple within five years. By 2035, the industry may consume 21.4 terawatt hours annually — nearly as much as Australia’s aluminium smelters combined.
Globally, datacentre electricity demand is growing four times faster than other sectors, according to the International Energy Agency. Hyperscale facilities — the kind built to power AI systems — can require 100 megawatts or more, equivalent to the annual electricity use of around 100,000 households. Multiply that across dozens of sites and the scale becomes clearer.
The obvious question follows: who pays?
Could Electricity Prices Rise?
Energy analysts warn there will be a cost. Expanding generation and network infrastructure to meet this new demand isn’t free. A report prepared for the Clean Energy Finance Corporation suggests wholesale electricity prices could rise by 26% in New South Wales and 23% in Victoria by 2035 if datacentre growth continues at pace. The reason? Greater reliance on expensive gas peaking plants when renewable supply isn’t sufficient.
Industry representatives counter that datacentres are among the largest corporate investors in renewable energy, often signing long-term power purchase agreements and installing onsite solar. They argue that with the right policy settings, growth can be paired with clean energy expansion. Still, timing matters. If demand grows faster than renewable capacity, fossil fuels may fill the gap — at least temporarily.
Emissions and Climate Targets Under Pressure
Australia’s emissions trajectory depends heavily on decarbonising the electricity grid. If large new sources of demand emerge before renewable infrastructure is fully scaled, it complicates the transition. Some projections indicate additional datacentre demand could slow emissions reductions after 2035, reports The Guardian. It’s a delicate balance. Digital infrastructure supports productivity and economic growth. Yet climate commitments require careful management of new energy loads.
The Water Question
Electricity isn’t the only concern. Cooling servers generates substantial heat, and cooling systems often rely on water. In Sydney alone, datacentre water demand could reach 250 megalitres per day by 2035 — roughly equivalent to Canberra’s drinking water consumption.
The industry describes itself as a “modest” water user and points to closed-loop systems and recycled water initiatives. Water authorities, however, are preparing for significant demand increases. Ultimately, datacentres are becoming as critical to modern life as roads or power lines. The challenge is ensuring their expansion strengthens Australia’s digital future without straining the very resources that power it.
