Victoria proposes mandating new data centres source their own green power

By Sherin Sunny and Rajasik Mukherjee

Sept 22 (Reuters) - Australia's Victoria state has proposed that new data centres in the region will have to secure their own renewable energy supply, among other requirements, as part of its sustainable data centre development plan.

Victoria's Premier Ben Carroll, who announced the proposal on Tuesday, called the regulations the "strongest, clearest data centre rules in the country".

The proposed new rules would require data centres to secure their own renewable energy supply and storage, and bear the connection costs and network upgrades.

The new mandate effectively asks data centre developers to become power project developers, which would be capital intensive and add lead time, said William Taylor, COO at ETFshares.

Taylor said some of the largest hyperscale operators already run dedicated renewable power purchase agreements as part of standard global practice, and that Victoria's announcement may help formalise the practice.

"The bigger cost impact is likely felt by mid tier and operators without the balance sheet to fund dedicated generation alongside the data centre itself."

The new rules would prohibit the construction of data centres in residential zones, near schools and childcare centres, and in rural areas that cannot support the infrastructure, while also passing on the responsibility to manage traffic during construction and operation of these facilities that power AI growth.

It would also require players to use recycled or non-drinking water for cooling, as data centre energy demand in Victoria grows rapidly and communities across Australia push back against the sector's growing strain on land, water and power resources.

Data centres in Victoria currently use less than 1% of the state's drinking water for cooling, according to the government statement.

NEXTDC NXT.AX, AirTrunk and CDC are some of the major data centre operators in the state.

The new set of rules is part of the Victorian government's Sustainable Data Centre Action Plan that sets out what is expected of data centre development in Victoria across planning, water, environment and energy, and how the government will coordinate to support it.

While the Australian government previously promised to set restrictions from 2027 over data centre resource use, it continues to court an investment boom that economists say may total A$150 billion ($106.53 billion) in Australia by 2030.

($1 = 1.4081 Australian dollars)