NSW Releases New Guidelines to Fast-Track Data Centre Approvals

Under the plan, data centre projects can have their developments assessed within 75 days if they meet performance measures across six key principles.

An aerial view of a 49.5-megawatt three-level data centre under construction in Vernon, Calif., on July 8, 2026. Mario Tama/Getty Images

The New South Wales (NSW) government has released new guidelines allowing data centre approvals to be fast-tracked in less than three months.

Under the plan, data centre projects can have their developments assessed within 75 days if they meet performance measures across six key principles.

Specifically, they must apply “world-class” environmental and efficiency standards during construction while ensuring they do not impose a net cost on consumers or communities.

Projects also need to fund additional water and energy supplies, improve local infrastructure and amenity, invest in future industries across the supply chain, and support jobs through training and skills development.

The NSW government is also planning regulatory reforms to ensure data centres pay for their own electricity network upgrades and the full cost of water needed to service them, while protecting other users and appropriately managing the impacts of drought and water scarcity.

At the same time, it will establish an “Office of AI” in the Cabinet Office to support AI adoption in the state.

NSW Climate Change Minister Penny Sharpe stressed the need for data centres to invest in supporting infrastructure.

“As demand for data centres increases, NSW will ensure the infrastructure needed to support them grows with it,” she said.

“These reforms will make sure data centre growth drives investment in renewable energy, while holding operators to the highest air quality standards.”

Meanwhile, Planning and Public Spaces Minister Paul Scully said the guidelines provide clearer expectations for stakeholders.

“Data centres are the enabling infrastructure for modern economies and communities,” he said.

“These guidelines provide clear expectations, improving transparency and providing certainty for both communities and investors.”

The announcement comes months after Liberal Member of Legislative Council Jacqui Munro condemned the NSW Labor government for not developing a data centre strategy.

In June, Munro called for a way forward to strategically manage electricity and water use, while claiming the government did not want to discuss the issue in Parliament.

Property Council Welcomes New Strategy

Property Council of Australia NSW Executive Director Katie Stevenson said the framework would give investors clearer rules and communities greater confidence.

“These are practical reforms that can help NSW compete for investment while maintaining strong environmental, planning and community standards,” she said.

“This is a fast-moving sector, and the framework will need to evolve as technology, energy markets and infrastructure needs change. Ongoing engagement with industry will be essential to ensure the guidelines remain practical, proportionate and fit for purpose.”

Concerns About Expansion of Data Centres

City of Sydney Deputy Lord Mayor Jess Miller recently expressed serious concerns about the unmanaged expansion of data centre infrastructure.

She highlighted data centres’ power demands and use of drinking water, saying they could account for up to 25 percent of Sydney’s drinking water use by 2035.

“If every data centre in the NSW Planning portal is built, their combined maximum power demands in western Sydney will climb to about 4.4 gigawatts in a decade,” Miller said in a submission to a parliamentary inquiry into data centres in March 2026 (pdf).

“That is equivalent to the average electricity load of more than 10 million households, and at their peak, they will demand almost four times as much power as the rest of the city.”

Meanwhile, a campaign to halt the expansion of data centres in NSW has garnered over 2,800 signatures.

“We demand an urgent halt to the expansion of data centres in NSW. Data centres pollute the environment, use huge amounts of electricity and threaten to drain the supply of drinking water,” the campaign published on Megaphone said.

“Their 24/7 operation comes with persistent noise that has an impact on surrounding communities.”