Victoria and NSW Set Parallel Rules for Data Centre Power and Water

Australia's two largest states now require data centre developers to account for every megawatt and every litre — with Victoria's amendment VC324 proposing a dedicated land-use term and NSW already operating the country's first state-level data centre regulatory package.

Victoria's Department of Jobs, Skills, Industry and Regions published its Sustainable Data Centre Action Plan in late October 2026. The plan promises 'clarity and predictability' for stakeholders and 'appropriate guardrails' for community and resource impacts. It lands ahead of Commonwealth reforms on data centre energy, water and land-use standards slated for early 2027, and Victoria says it will seek consistency with the national approach once that's agreed.

The takeaway: two state frameworks are converging on the same material question — who pays for the power and water a data centre consumes.

What does each state's framework actually contain?

New South Wales moved first. Its NSW Data Centre Guidelines and accompanying Data Centre Policy Framework form the first dedicated state-level data centre regulatory package in Australia, delivered through existing levers: the planning system, energy regulations and water pricing.

Victoria follows the same model. Its Action Plan sets policy positions on location, electricity and water use, investment obligations and local benefits — all to be delivered through Victoria's existing planning, environmental, water and energy frameworks, plus new guidelines and planning-scheme amendments.

The state has moved fast. The government has given notice to local councils of amendment VC324, which proposes a new data centre land use term, policy and stronger locational controls. Approval timing is unclear, and the Victorian election on 28 November 2026 adds risk that a change of government could alter the measures.

Where can data centres be built?

The two states diverge sharply here.

• Victoria: Data centre developments will be prohibited in sensitive zones. The 2024 Green Wedges and Agricultural Land Action Plan already commits to banning new data centres in Green Wedge Zone and Rural Conservation Zone land.
• NSW: Data centres count as 'high technology industry' under 'light industry', generally permissible with consent in B5 Business Development, B7 Business Park, E3 Productivity Support and E4 General Industrial zones.

Both states have standard land-use definitions — Victoria's proposed wording covers land used to 'collect, distribute, process, or store digital data', while NSW's Standard Instrument defines a data centre as a building whose 'principal purpose' is that activity.

What are the energy and water requirements?

This is where the economics shift.

Victoria's Action Plan contemplates that data centre electricity demand must be met by new investment in renewable energy. Facilities will pay the full cost of water infrastructure for their operations. Water-cooled facilities must use recycled or non-drinking water, or hold a transition agreement with a water corporation and offset interim drinking-water use through funding or efficiency programs.

NSW requires facilities to enter PPAs and firming agreements for additional renewable generation. Water-intensive cooling systems must use 100% recycled water or carry a transition agreement, with no adverse impact on agricultural water use.

Efficiency targets line up closely:

• dWUE below 1.0 for potable water, or below 1.6 for non-potable — both states
• Victoria measures to ISO/IEC 30132-9.2022
• NSW adds an alternative pathway: dPUE below 1.3 and dWUE below 0.44
• NSW facilities must cut grid-supplied electricity demand by 25% for a two-hour period, excluding diesel back-up generators
• Victoria applies night-time noise limits of 55dB(A) with a tonal penalty

Referral regimes also expand. Victoria proposes referral authority status for WorkSafe Victoria, Fire Rescue Victoria, VicGrid and the relevant water corporation on all applications, with an expanded EPA role. NSW referrals vary by location and may involve NSW EPA, Fire Rescue NSW, Transport for NSW, Sydney Water and the DCCEEW conservation group.

Will the rules apply retrospectively?

No — in either state. Victoria's Premier stated: 'The new rules won't be retrospective for applications under assessment, but we expect data centres to continue to work with locals and respond to their concerns.' NSW's Guidelines impose no mandatory requirements, though proponents will be encouraged to meet them.

Victoria also contemplates a 'Local Investment Guarantee' covering local employment, First Nations engagement, procurement and amenity; NSW pushes local content, supply chains and operator training.

What happens next?

Commonwealth legislation is foreshadowed but undetailed, and it raises unresolved questions about legislative power and how federal law interacts with state statutes. The state efficiency standards are likely to become benchmarks for future national obligations. For now, the milestone to watch is the fate of amendment VC324 after Victoria's 28 November election.