Australia’s Datacenter Boom: The High Cost of the AI Revolution

Following recent reports on the complex relationship between artificial intelligence and climate goals, the focus in Australia has shifted toward the massive physical impact of new digital infrastructure. Across the country, a sudden and enormous boom in datacenter construction is underway. These facilities, which are essentially large, climate-controlled warehouses filled with servers, are the backbone of the artificial intelligence revolution. However, as the industry grows, experts and policymakers are increasingly concerned about the environmental and economic costs of these projects.

One of the most significant examples of this trend is a proposed “hyperscale” datacenter on Mamre Road in Sydney’s outer western suburbs. If this project receives final approval, it will become one of the largest facilities of its kind in the world. The site is planned to cover 52 hectares and will include six four-storey buildings, nearly 1,000 cooling units, and hundreds of diesel backup power generators. According to The Guardian, this project is part of a massive $155 billion investment pipeline expected over the next ten years. Currently, there are about 160 datacenters operating in Australia, with another 90 projects proposed.

The primary concern for many is the sheer amount of energy these buildings consume. The Mamre Road project alone is expected to become the single largest energy user in the country, requiring more power than the Tomago aluminium smelter. Alex Hooper, the head of climate and energy economics at Oxford Economics Australia, notes that datacenters currently account for 2.8% of electricity consumption on the east coast. She warns that this figure could rise to 7% by 2030 and potentially exceed 10% by the mid-2030s. The Climate Council has estimated that if this extra demand is not balanced by new renewable energy sources, wholesale electricity prices could increase by 20% by 2035.

Beyond electricity, these facilities require vast amounts of water for evaporative cooling—a process that uses water to keep servers from overheating. Furthermore, they require large areas of land, often located near residential neighborhoods. This has led to pushback from local authorities, such as the Penrith council, which has expressed opposition to the Mamre Road development. The debate is not just about resources; it is also about the economic return. While datacenters require thousands of workers during the construction phase, they only need hundreds of staff once they are fully operational. This has led some experts to question whether the promised productivity gains are worth the strain on the national power grid.

Despite these challenges, some observers believe Australia can still manage this growth effectively. Beth Webster, an economics professor at Melbourne University, argues that Australia can learn from the mistakes made in the United States. She suggests that the country must avoid the pitfalls of placing centers too close to homes and failing to require developers to provide their own additional energy and water sources. According to Webster, the key is to be smart about how much investment the country accepts and to ensure that these centers play a clear role in national economic prosperity.

As the nation moves forward, the question remains: how much power and water can Australia affordably provide to support the global AI rush? Alex Hooper emphasizes that while there are significant opportunities for growth, the benefits are not guaranteed. Policymakers at all levels of government are now working to determine the right balance. They must decide if the digital economy’s needs can be met without making life more expensive or difficult for the average Australian. The answer to this question will likely shape the country’s energy landscape for the next decade.