Great expectations: What the Australian Government requires of data centres and AI infrastructure

Data centres and AI infrastructure sit at the heart of Australia’s digital ecosystems, and are becoming an essential feature of modern life.

The Australian Government is now setting expectations of data centres and AI infrastructure developers (Expectations) to establish a social licence for, and manage the impacts of, data centres and AI infrastructure in Australia, building on the National AI Plan which was released last December.

The Expectations is a policy jointly announced by the Minister for Industry and Innovation, the Minister for Climate Change and Energy, and the Assistant Minister for Science, Technology and the Digital Economy. The Expectations have implications for developers and operators of data centres and AI infrastructure, investors in these assets, organisations planning for AI-related capacity and stakeholders engaging with governments on AI and digital infrastructure policy.

Timing for the release of the Expectations is significant. They provide the first guidance for the proposal in the National AI plan to streamline approvals for data centres, a Parliamentary Inquiry is looking at the development and regulation of data centres in New South Wales, and draft reforms from the Australian Energy Market Commission provide new technical standards requiring large electricity users, including data centres, to remain connected during disturbances on the electricity grid and respond to instability. And there is rapidly increasing competition within Australia and globally for data centre investment.

How the Expectations will affect data centres and AI infrastructure

The Expectations are designed to ensure there are nationally consistent benchmarks for data centre and AI infrastructure. They will apply to new or expanded developments within Australia to operators of co‑location sites, hyperscale operations and large-scale AI computer centres, but not to small-scale edge or on-site enterprise data centres.

There is a clear statement that the Expectations are intended to encourage global investment in Australia, recognising Australia's strong position to operate as a regional data and AI hub.

A few of the Expectations are already imposed by rules and legislation – for example, by the payment of connections costs under the National Electricity Rules, or the operation of the Security of Critical Infrastructure Act 2018 (Cth) in relation to the management and protection of data – while others reflect good corporate practice.

In practice:

• through regulatory processes, the Australian Government will prioritise proposals most closely aligned with the Expectations. Resilience and national security matters will continue to be considered as part of that prioritisation; and

• the Australian Government will look to work with each State and Territory and market participants to implement the Expectations, particularly through the Energy and Climate Change Ministerial Council. The goal is for the Expectations to work alongside existing laws and help guide State, Territory and local governments across the country.

The focus of the Expectations appears to be on the infrastructure, not what's running on the infrastructure – such as AI models or systems - even though some themes in the Expectations could be applied to AI governance like "Australian values", contributing to jobs, R&D and delivering benefit to the Australian economy.

Five overarching Expectations

1. Prioritise Australia’s national interest

Data centre operators will be expected to act in the interests of the Australian economy and local communities, operating in good faith to deliver positive outcomes whilst minimising adverse impacts. They will be expected to maintain a social licence to operate through open community engagement and ensure robust protection of sensitive data, preparedness against threats and strict access controls.

2. Support Australia’s energy transition

New data centres and AI infrastructure will be expected to not increase energy prices, and to contribute positively to Australia's energy transition. This will include working in coordination with energy regulators and suppliers to secure additional clean energy, cover a share of transmission and infrastructure costs, adopt leading efficiency measures and enhance grid stability through demand flexibility and peak-load management.

3. Use water sustainably and responsibly

Data centres will be expected to minimise water use, engaging early with water utilities, communities and First Nations peoples on appropriate locations and secure water sources. They will be expected to adopt efficient cooling technologies, prioritise non-potable water and pursue circular water opportunities. Operators will also be expected to cover their share of infrastructure and delivery costs, build resilience against water disruptions and climate change, and provide transparent reporting on water usage and efficiency.

4. Invest in Australian skills and jobs

Data centre operators will be expected to support Australia's economy by creating fair, safe and well-paid jobs, investing in domestic workforce development through apprenticeships and structured training. They will also be expected to collaborate with governments, unions, education providers and other employers to address skills gaps and build a pipeline of skilled workers for data centre construction and operation.

5. Strengthen research, innovation and local capability

Large-scale compute providers, including hyperscalers and neoclouds, will be expected to contribute to Australian research and innovation by providing favourable compute access to start-ups, small businesses, researchers and not-for-profits. They will also be expected to deploy engineers and researchers in Australia, build local technical capability, and invest in Australian supply chains.