Data in the city and the invisible impact of the cloud

As AI and cloud computing drive a boom in data centre construction, Australia faces growing questions about how these energy-hungry facilities will affect electricity demand, local communities and the transition to net zero. Mia-Francesca Jones examines the trade-offs—and asks whether Australia can build the cloud more sustainably.

Every time you stream a movie, save a file to the cloud, send an email, or use ChatGPT for a query, you’re contributing to the demand for more data centres. These hyperscale facilities that power our online lives are expanding rapidly across Australia, with the Australian Data Centre Forecast Report estimating there are already 162 operational data centres nationwide, and many more planned or under construction.

The rapid integration of AI into applications like Microsoft 365 and Canva means that many of us don’t even realise we’re using AI, as everyday tasks increasingly drain more and more energy. For example, a ChatGPT query may use as much as ten times more energy than a (non-AI) Google search. While it’s difficult to accurately measure just how much water and energy AI data centres use, reports estimate it could be billions of litres of water a year, and just over 2% of the electricity on the National Electricity Market (NEM)—the equivalent power use of more than 700,000 homes.

In a May 2026 report, Greenpeace described data centres as “energy vampires”, arguing that their rapid expansion risks derailing Australia’s energy transition by increasing reliance on fossil fuel generation and outpacing the rollout of new renewable energy. The organisation also accused the industry of greenwashing, stating: “Around the world, data centre development fails to cover its own growth with new renewables, let alone exceed it, and the industry group in Australia admits the same domestically.”

Aside from the drain on energy and water that it takes to run these centres, they are increasingly popping up in residential areas, giving off an eerie and disturbing hum, and taking up space that could be otherwise used for much-needed housing or green space.

While industries and governments argue that data centres are essential infrastructure for Australia’s digital and economic future, their rapid growth is raising questions about energy use, emissions, water consumption and impacts on local communities. Data centres have been present in Australia for some time, however emerging concerns are focused on the increasing scale of the new developments, the speed of planning approvals and the lack of long-term data on how these facilities might affect surrounding ecosystems—including their impacts on human and animal lives.

The bright flicker of artificial light at night (ALAN), for example, disrupts circadian rhythms. Countries where humans are exposed to higher levels of ALAN see higher levels of cardiovascular disease and cancer (Victor Chang Cardiac Research Institute). And for animal life, ALAN disrupts migration and breeding patterns, makes prey species more vulnerable to predators and increases overall stress. Then there is the ‘acoustic footprint’ caused by the massive cooling units that can reach up to 96 decibels. The low-frequency noise pollution is at best a threat to residents’ peace and enjoyment, and at worst causes headaches, chronic stress and insomnia (as reported by residents in the USA)—turning once quiet neighbourhoods into uncanny dystopias.

There are some benefits to having data centres onshore—like strengthening security and providing sovereignty over Australia’s data—and increasing productivity across healthcare, logistics and financial services, and the promise that AI adoption could unlock $115 billion in annual economic gains for Australia by 2030 (according to Open AI’s “2025 AI in Australia” report). But behind the promise of a booming digital future is a growing challenge: how can Australia balance the need for data centres and still meet our climate and energy goals? To understand the impacts and concerns of the data centre rollout, we spoke with industry experts, community representatives and local government leaders.

Energy demand of data centres
In its most recent official projections, the Australian Energy Market Operator (AEMO) forecasts that data centre electricity demand in the NEM will triple by 2030. This would represent around 6% of total NEM electricity use—roughly enough to power every household in Victoria. By 2049–50, demand is expected to climb to 34 terawatt-hours (TWh), equivalent to about 12% of electricity in the NEM.

Demand from the sector is already rising quickly, reportedly nearly doubling in Victoria and increasing by 18% in NSW over the past year. Taken together, these projections suggest data centres are set to become one of the fastest-growing sources of electricity demand in Australia’s energy system, with significant implications for how the grid is planned, powered and shared.

For example, if approved, the proposed 1.2-gigawatt Mamre Road Data Centre in Sydney would be among the largest data centre developments in the world, comprising six four-storey buildings, 936 cooling units, 852 diesel backup generators and 14.4 million litres of diesel storage. Melbourne is seeing similar growth, with a proposed data centre in Plumpton—a residential area west of Melbourne CBD—expected to cover around 10 hectares if future expansion plans proceed.

So, where is all of this energy coming from?

The Clean Energy Finance Corporation’s (CEFC) modelling warns that:

“Without additional renewable energy and storage, data centre growth could significantly impact the electricity market, potentially increasing wholesale electricity prices by 26% in NSW and 23% in Victoria by 2035 … [it] could also lead to a 14% increase in grid emissions across the NEM.”

A report produced by CEFC found that adding 3.2GW of renewable generation and 1.9GW of battery storage by 2035 to support data centre load would contain price rises and neutralise additional emissions. In a media release, the CEFC head of infrastructure Julia Hinwood said: “Innovation in efficiency and storage is redefining what data centres can be—not just major consumers of electricity, but active participants in the clean energy system.”

However, Dr Ascelin Gordon, senior lecturer in sustainability and urban planning at RMIT, says the relationship between data centres and renewable energy is complex: “There are lots of instances where data centres are involved in using renewable energy sources to help cover their energy requirements… but there is quite a bit of discussion around whether they are just buying it from existing sources”. A key challenge, he explains, is timing: data centres can be built and operational within around five years, while renewable energy projects often take longer to develop.

Given the scale of new investment flowing into the sector, Gordon says it’s “difficult to prove and be certain that the renewable energy they are using is additional over and above what is already in the grid.” Ultimately, he cautions that “the sheer amount coming online risks our climate targets in terms of reducing carbon emissions”.

Deputy Lord Mayor of Sydney Jess Miller has led an Inquiry into data centres in NSW and has been advocating for stronger regulation to ensure data centres contribute fairly to Australia’s net zero goals. She says:

“If a data centre is going to draw down directly on NSW’s grid energy to power one gigawatt facility 24/7, then it needs to return that same amount of energy directly back to the immediate area (not via a power purchase agreement in another state). Installing one gigawatt of solar and batteries in the surrounding residential (local renewable energy zone) area via a development contribution is what would make this kind of infrastructure the way to unlock renewable energy for people who so far can’t access it: like the tens of thousands of people living in apartments in the City of Sydney who would love to be able to benefit from solar in the same way that people with freestanding homes can.”

Wider impacts on health and place
Beyond the drain on the electricity grid, a major concern is the amount of emissions that data centres contribute to the atmosphere through the diesel backup systems that require regular testing. Gordon says, “These data centres need to have 100% agreement that they will remain online during blackouts and in heat waves—so that means that even if they are mostly using renewables, they have to have a fleet of diesel generators tested weekly and monthly.”

Every time the diesel backup generators are tested, they release diesel particulates into the air, which is then being breathed in by local residents. NextDC facility, for example, is in the inner Melbourne suburb of West Footscray and located directly across from residential homes. The centre has plans to expand and obtain an additional 100-plus diesel backup generators. Brett Petrikios, who has worked in the IT industry for 40 years, has been investigating the impacts of data centres in the inner west.

He says, “When those things fire up, they’re going to pump a particular carcinogen into the air, potentially impacting people that suffer from respiratory problems. We already have a significantly higher percent of hospital admissions for asthma in the west, and they’re going to put a fleet of diesel generators in the centre of that hub.”

Gordon also warns about the growing issue of electronic waste—“racks and racks of servers that line the data centres that need to be replaced every 5–7 years. Because the surge is really just taking off, we are not yet seeing the massive influx of e-waste. It’s going to be a huge issue… E-waste is already a problem, and this is going to exacerbate the problem hugely.”

Beyond emissions, waste and resource use, there are implications for the tranquillity of the surrounding environments. Residents in Melbourne and Sydney, where the clusters of new data centres are focused, have taken to social media to share how the constant noise, light pollution and visual impact of large-scale industrial buildings is hindering their enjoyment of their suburbs, and causing anxiety about competing for resources.

Miller says, “People are very angry about scarce resources, especially drinking water in a drought-prone country, being used in this way by corporations. There’s also a lot of secrecy around data centres, because they are high-security buildings with very strict limits on who can enter them. So if you have an entire city block taken up by a building that barely anyone enters or exits and has no street activation—no shops or cafes on the ground floor—it creates a really unsettling social void that people naturally become suspicious of. What is going on inside there? Who are the clients of the data centre? What kind of data is being held in there? We have no way of knowing that information.”

She says that at the state parliamentary inquiry, the City of Sydney was pushing for data centres to be zoned appropriately as “heavy industry” to make sure they pay their fair share of contributions and that scarce resources are tightly managed.

Community pushback
Community pushback against data centres in residential areas has begun to spread throughout Australia, with rallies held in Victoria and local submissions to parliament. In the town of Hazelmere, Western Australia, a proposed hyperscale centre has been withdrawn following opposition from local residents, environmental advocates and Noongar Traditional Owners, who raised concerns about its proximity to the culturally and environmentally significant Mandoon Bilya (Helena River).

For Francesca Flynn, executive director of the Bibbul Ngarma Aboriginal Association (BNAA), the outcome brought a sense of relief. She describes it as “joy and gratitude for the strength of our local community coming together to protect the river and each other,” and that with the proposal now withdrawn, “BNAA says it will refocus on its BoorYul-Bah-Bilya river restoration program, which aims to develop a long-term, community-led model for caring for the catchment.”

Flynn says the site was fundamentally inappropriate for development of this scale, describing it as “difficult to identify a less suitable location.” While the City of Swan cited noise from diesel backup generators in its assessment to withdraw, she says this did not capture the full extent of community opposition. She says that serious questions are now being asked about how the proposal got as far as it did, given its apparent non-compliance with the City of Swan’s Local Planning Scheme:

“The City’s report recommended refusal on the basis of noise alone, but it also highlighted potential mitigation issues that left the door wide open to approval despite the many other valid concerns, including planning incompatibility, inappropriate land use, public infrastructure burden, sensitive environmental and cultural location, Aboriginal heritage risks and strong community opposition, including from Noongar Traditional Owners, the adjacent primary school and nearby residences.”

The case has also raised broader questions about planning frameworks in Western Australia, after the facility was assessed as a warehouse despite its industrial scale and resource demands. Flynn argues that “a hyperscale AI data centre is nothing like a warehouse”—particularly in its energy and water use and continuous operation.

BNAA and community members are now calling for stronger planning controls and earlier consultation. Flynn says that while BNAA understand that some data centres are needed, “they also need to be built in the right places where they don’t burden the community—in industrial areas that are properly serviced with sewerage and power—not on rivers or heritage sites, and not next to residents or schools.”

Noongar Elder and BNAA chairperson Walter McGuire OAM, said in a statement: “Bibbul Ngarma Aboriginal Association has story, song, heart, spirit, soul… we speak, we stand for this Environment. We were deeply concerned to learn that GreenSquareDC wanted to bypass community concerns and build a giant data centre on Our River. The data centre would have had a devastating impact on Our River and the local community. It would have undermined all of the work from our local and broader community to deliver a lasting legacy for Our River.”

In June 2026, the developer behind a $4.8 million data centre in North Katoomba withdrew its proposal after hundreds of local residents raised concerns about the noise, bushfire risks and environmental threats. Blue Mountains Mayor Mark Greenhill said the withdrawal showed the importance of community voices being heard through the planning process: “The Blue Mountains is a city within a World Heritage Area. Any development proposed here must be appropriate to its setting, respectful of nearby residents, and properly tested against the environmental and infrastructure constraints of our city.” With $64 billion of data centre projects so far rejected or restricted in the USA (according to datacenterwatch.org), Australia is beginning to see the effects of local activism, as more and more communities say no to data centres.

As anxiety about proposed data centres ripples across the country, the outcome in Hazelmere and Katoomba provides hope that community pushback still holds power.

The future of Australia’s digital infrastructure
Data centres will continue to expand across Australia, and the growing question is not just how many we build, but where they should go and what conditions make a location suitable. Researchers and planners are increasingly pointing to a complex mix of factors, including heat impacts, water access, energy supply, digital connectivity and proximity to communities.

There are questions about whether data centres themselves may contribute to localised warming effects, with heat radiating several hundred metres beyond their boundaries. While still limited and not fully peer-reviewed, emerging research raises further concerns that such facilities might worsen the impacts of climate change on residents already living in dense urban environments without adequate tree cover to offset more heat.

If we must build data centres, where should they go? According to Gordon, data centres that require low latency and high-speed connectivity to respond to live queries may need to remain close to major cities. However, those used for AI model training may not require the same level of connectivity, which opens the possibility of regional or rural siting where community impact, land availability and renewable energy access may be more favourable.

Gordon says researchers at RMIT are reportedly working on a broader spatial framework to help identify suitable locations for data centres across metropolitan regions, taking into account water use, energy supply, noise and environmental impacts. The aim is to better understand where infrastructure could be placed with the least overall burden on communities and ecosystems.

In March 2026, the Australian government released a set of expectations for data centres and AI infrastructure developers, including that: “New data centres and AI infrastructure should not place upward pressure on energy prices and should make a positive contribution to Australia’s energy transition,” and, “Data centres should use innovative, efficient and sustainable solutions to minimise water use” (industry.gov.au).

Gordon says he agrees with these expectations in principle, but “there are no hard requirements there”—meaning that while the outlined priorities are positive, they are not enforceable. There is potential for data centres to be environmentally sustainable—if the policies are in place to ensure that they are powered by additional renewable energy, rather than shifting existing sources around the grid. He adds government action is needed to ensure the resources are safeguarded while calls for a moratorium on data centres would enable careful deliberation of development rather than fast-tracking plans, implementing rushed decisions and causing community angst.

The sentiment from Petrikios, Gordon, Miller and Flynn is not about the advancement of technology itself, but how it is planned and governed. Petrikios argues that Australia has an opportunity to design better infrastructure systems rather than replicate outdated industrial models and diesel generators. He says, “We could do this so well, we could use it to remove a lot of the old manufacturing factories… You don’t build a 21st century engine with a 19th century exhaust pipe.”

Gordon adds the conversation also needs to turn inward—towards our own behaviour as digital consumers that makes all of this necessary.