Wide-ranging inquiry into data centres in NSW covers energy / water needs and much more

A wide-ranging parliamentary Inquiry into the development and regulation of data centres across New South Wales is underway, with a final report from the NSW Legislative Council Public Accountability and Works Committee due by 30 September 2026.

"This inquiry is about ensuring plans for data centre growth in New South Wales are guided by a coherent and integrated NSW Government strategy that takes into consideration the immediate and long-term impacts of data centres on energy systems, water resources, climate targets and communities", according to the Committee Chair, Ms Abigail Boyd MLC.

Unsurprisingly, the inquiry terms of reference are wide-ranging and ambitious. We have highlighted some key areas of focus below.

Scale and growth trajectory

The Committee will assess the current and projected scale of data centre development, including geographic clustering and the preparedness of state planning, infrastructure and resources for anticipated growth.

Planning frameworks

A review of the planning framework will consider the classification of data centres as State Significant Development (SSD) (including the possibility of using power-consumption thresholds as an SSD trigger) and the effectiveness of fast-track and facilitation mechanisms such as the Investment Delivery Authority (which has already fast-tracked some data centre proposals). The adequacy of current arrangements in addressing cumulative and precinct-level impacts will also be scrutinised.

Electricity demand and emissions

The Inquiry will investigate the impact of data centres on electricity networks, generation planning and emissions reduction targets. The Inquiry terms of reference also include consideration of cost recovery in relation to network investment.

Water usage and cooling

The Committee will examine current and projected water use, risks to water security and the feasibility of alternative cooling systems. The Inquiry terms of reference include consideration of "cost recovery and the allocation of water-related infrastructure costs".

Local environmental and community impacts

The inquiry will consider the effects of data centres on surrounding communities, including noise, air quality, heat, traffic and land-use conflicts, with particular attention to Western Sydney and other growth corridors.

Land use and housing

The opportunity cost of allocating land to data centres, interactions with housing supply and employment-intensive industries, and the balance of competing social, environmental and economic needs will also be assessed.

Economic and distributional outcomes

The Committee will evaluate the economic benefits of data centre development, the distribution of costs and benefits, and the extent of public subsidies and State facilitation provided to the sector.

Governance, transparency, and accountability

The adequacy of public reporting, transparency of approval processes, and potential governance risks, including the impact of lobbying and donations, will also be examined.

Workforce considerations

The Inquiry will address employment conditions, workforce development, skills and training, and the role of labour standards and procurement in large-scale projects.

Lessons from other jurisdictions

Approaches adopted internationally and interstate will be reviewed for their applicability to the NSW context. We expect this will include consideration of the Commonwealth Government's current initiative to streamline approvals for data centres in co-operation with State Governments.

While there are currently no comparable international examples of formal Government inquiries into data centres, stakeholders may benefit from reviewing some of the lessons from other jurisdictions to address some of the themes, such as:

• a research briefing prepared for the UK Parliament in November 2025 which discusses data centre planning policies, sustainability and resilience; and

• the European Commission's new initiatives on data centre efficiency and the development of a strategic roadmap for digitalisation and AI in energy.