The government of the Australian State of Victoria has introduced a new regulatory framework for data centres built in the state, including a requirement for operators to secure their own renewable energy supply (Victoria State statement, 22/09/2026).
Under the new rules, data centre operators will first be required to provide their own renewable energy supply and storage. They will have to match any additional demand with new generation capacity, while also covering connection costs and network upgrades. Data centres will additionally be required to use recycled or non-drinking water for cooling. “Data centres currently use less than 1% of Victoria’s drinking water for cooling, but the right amount is zero. If they can’t do it immediately, they’ll have to offset what they use, and pay for infrastructure upgrades they need”, said the government.
The rules would also prevent data centres from being built in residential zones, near schools and childcare centres, or in rural areas where the required infrastructure cannot be supported. Responsibility for managing traffic linked to the construction and operation of these facilities, which support AI growth, would also be passed on.
The proposed changes would not apply retrospectively. Planning applications that have already been approved, as well as a further eight applications currently before the minister, would therefore not be subject to the new requirements.
The measures form part of the Victorian government's Sustainable Data Centre Action Plan, which outlines expectations for data centre development in Victoria across planning, water, environment and energy, as well as how the government will coordinate efforts to support the sector.
The data centre industry is facing increasing constraints from governments worldwide. Electricity demand from data centres is expected to rise sharply and become a significant new source of electricity consumption over the coming decades. This additional demand is already placing increased pressure on power grids and energy bills. Recently, the US state of Massachusetts announced a similar measure requiring companies to secure their own renewable energy supply for data centres with peak electricity demand above 25 MW.
In August 2026, the Australian Energy Market Operator (AEMO) published its 2026 outlook, projecting that electricity consumption from data centres across the National Electricity Market (NEM) will rise from around 5 TWh in 2025-26 to 34 TWh by 2035-36. Their share of electricity supplied through the grid is expected to increase from approximately 3% to 13% (KEI, 27/08/2026).
Interested in Global Energy Research?
Enerdata's premium online information service provides up-to-date market reports on 110+ countries. The reports include valuable market data and analysis as well as a daily newsfeed, curated by our energy analysts, on the oil, gas, coal and power markets.
This user-friendly tool gives you the essentials about the domestic markets of your concern, including market structure, organisation, actors, projects and business perspectives.