As Australia experiences an AI-driven boom in data centre construction, experts warn that the massive facilities are placing significant strain on already limited water resources. In Sydney alone, water demand for data centres is forecast to exceed the volume of Canberra's total drinking water within the next decade, according to Sydney Water estimates.
In Melbourne, the Victorian government has announced a £5.5 million investment to become Australia's data centre capital. However, hyperscale data centre applications already on hand exceed the water demands of nearly all of the state's top 30 business customers combined, Melbourne Water noted in its submission to the Victorian pricing review.
Professor Priya Rajagopalan, director of the Post Carbon Research Centre at RMIT, explained that water and electricity demands depend on the cooling technology used. Evaporative cooling leads to significant water loss, while chillers require large amounts of water for cooling. Newer data centres are turning to water cooling due to higher server rack densities and increased computing power.
Some companies, such as NextDC, are moving towards liquid-to-chip cooling, which directly cools processors or GPUs. NextDC says its modelling suggests power usage effectiveness (PUE) could go as low as 1.15, but its actual PUE for the last financial year was 1.44, up from 1.42 the previous year.
Sydney Water is exploring climate-resilient and alternative water sources, such as recycled water and stormwater harvesting, to prepare for future demand. The utility assesses each proposed data centre connection individually and may require operators to fund upgrades if needed. Melbourne Water has sought upfront capital contributions from operators to avoid the financial burden falling on broader customers.
