Australia faces pre-rule rush for AI datacentre approvals
Australia's federal government is preparing new rules for datacentres that would require developers to avoid pushing up power prices, bring their own renewable energy to the grid, minimise water use and site facilities away from homes, schools and farmland. Because the rules will not be retrospective, any project approved before the legislation passes next year would only need to meet existing state or territory laws, prompting concern that developers will rush to secure approvals before the tougher regime takes effect, and fuelling calls, including from the Greens and local campaigners, for a moratorium on new approvals in the meantime.
Prime Minister Anthony Albanese hopes to secure national cabinet agreement on the federal rules at a meeting on Wednesday. The energy market operator Aemo reported 225 datacentres in development, with electricity demand from them forecast to grow from 5 to 34 terawatt hours by 2036, though over 40% of projects listed in 2025 have since stalled or dropped off. One test case is Project Mars, a 90MW, 22,000sqm datacentre proposed by Goodman Group near Sydney's Lane Cove River, which would draw 3.5ML of water daily and relies mostly on existing power with only limited solar capacity, drawing strong local opposition and warnings from an urban planning academic that fast-tracked approvals could carry political costs for state governments.
- Australia is drafting stricter datacentre rules on power and water use.
- New rules won't apply retrospectively, risking a pre-emptive approval rush.
- Sydney's Project Mars highlights local opposition and calls for a moratorium.
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Datacentres house the computer systems that store data and run online services, including artificial intelligence. They need large amounts of electricity and, in some cases, water for cooling, so their location and resource use can affect nearby communities and energy networks.
Australia’s federal government is developing national rules for new datacentres, while state and territory laws currently govern approvals. The proposed rules would set expectations around power prices, renewable energy, water use and distance from homes, schools and farmland; they would apply only to projects approved after the legislation takes effect.
The scale of planned development matters because electricity demand from datacentres is forecast to rise substantially, although some listed projects may not proceed. Project Mars, proposed near Sydney’s Lane Cove River by property group Goodman, has become a local example of concerns about a facility’s water use, power supply and proximity to surrounding areas.
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The case for
Opponents of a moratorium emphasise Australia's economic and strategic need for advanced datacentre infrastructure to compete globally and drive growth, job creation and technological advancement. They argue that existing regulatory frameworks represent legitimate democratic processes and that retrospectively changing the rules introduces damaging investment uncertainty. Many projects may ultimately comply with new federal standards anyway, making a blanket moratorium an overly blunt instrument that unnecessarily stifles development without addressing specific problem cases.
The case against
Proponents of a moratorium contend that allowing developers to rush approvals before stricter environmental and planning standards take effect permits regulatory arbitrage that undermines democratic values and fair process. Given Australia's water scarcity and grid capacity constraints, they argue that facilities grandfathered under weaker standards impose long-term costs on communities and future generations who will live with their environmental and social impacts. A temporary pause ensures equitable treatment and that development proceeds under genuinely updated standards reflecting current community values and resource realities.
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Originally published by The Guardian as “Australia may face a rush of datacentre construction as AI firms look to dodge upcoming rules, experts say”.