Regional Australia Ai Data Centre Boom Triggers Policy Revamp

Regional Australia is set to host much more of the nation's wave of renewable energy and artificial intelligence (AI) infrastructure as governments move to accelerate approvals and tighten oversight of major projects.

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The shift is being hastened by an exponential increase in opposition to proposed data centres across metropolitan areas, forcing developers to increasingly look beyond peri-urban fringes for sites with suitable access to land, power and water.

The situation may also forge an unusual political alliance in Canberra after new Greens leader David Shoebridge signalled that Labor would no longer receive a "blank cheque" for development proposals that came at the expense of farmland, forests or threatened species.

"We know we have to do this at speed and at scale," he said.

"But you always want to make sure that protecting nature is front and centre of the work we do."

The mark a shift in tone from a party that largely provided the Albanese government's emissions reduction agenda safe passage through the Senate during its first term.

Opposition energy and emissions reduction spokesman Dan Tehan welcomed the prospect of greater scrutiny of large-scale projects and said the Coalition would "love to work with him".

Under national standards agreed on at national cabinet in late August and expected to be legislated in early 2027, developers would be required to offset data centre electricity use through new renewable generation backed by firming capacity, such as batteries or gas, to help protect power bills and grid reliability from their massive energy demands.

Queensland and the Northern Territory secured a potential carve-out to power new data centres using gas and coal.

The debate is unfolding as governments grapple with how to accommodate the energy transition and data centres and secure social licence, while also actively promoting Australia as a potential global AI hub.

Firmus Technologies alone was expected to seek an ASX listing later this month, valuing the company at $44 billion.

Meanwhile, the Goodman Group last week cancelled its $1.2 billion Lane Cove data centre project in Sydney, which was just 20 metres from homes and 160m from a primary school, because of fierce local push back and the changing policy and regulatory environment.

It was the latest project to be cancelled in a metropolitan area this year.

Transmission company Transgrid told stakeholders recently that Western Sydney's capacity was largely exhausted beyond 2033 and pointed prospective developments towards the Hunter and Riverina regions in NSW.

The expansion of data centres, with more than 200 proposals moving through state and local planning and development approval processes across Australia, is also creating simultaneously evolving regulations at federal, state and local levels.

Queensland was the latest to move, with the Crisafulli government announcing late last week that major data centre applications would from now be assessed and coordinated through a state-led process rather than by local councils, mirroring its renewable energy reforms - which require community benefit agreements and social impact assessments.

Most councils have not included data centres in planning schemes, which the government said has created confusion and inconsistency.

"We will treat these projects no worse and no better than we do mining, renewables or tourism projects," the government said in a statement.

"Any deals must be done with the backing of councils and communities."

Zerra DC's $32 million Western Downs Digital Park, Australia's largest proposed data centre where Anthropic has already signed as a tenant, is sited near Dalby, Qld, and the developer had already applied for prescribed project status - which allows the Coordinator-General to override local council decisions on matters of significant economic importance.

The Toowoomba Regional Council last month voted unanimously to develop a policy preventing future data centres in the region from accessing the city's drinking water supply.

Victoria, which attracted $5.8b in data centre investment last year, also unveiled what is believed to be Australia's most comprehensive data centre policy last week.

The rules require new developments to bring renewable energy and storage, use recycled or non-drinking water for cooling, stay out of residential zones and maintain a 150-metre buffer from homes.

NSW introduced its own Data Centre Policy Framework, designed to accelerate compliant developments while imposing requirements around energy supply and water efficiency, last month.

Projects that meet the framework's performance measures are to be assessed within 75 days.

Communities in Victoria, South Australia and Tasmania have reported learning of major proposed developments through stock exchange announcements, leaked company documents and public meetings held after negotiations had been held with state governments.

The expansion is also beginning to become more visible in rural property markets.

While some developers are exploring opportunities to re-purpose industrial sites with existing grid connections and zoning approvals, agribusiness property specialists have reported land-holders being approached by speculators seeking sites for future data centre projects, in some cases offering multiples of market value .

Ray White Rural told this masthead that a property west of Melbourne, held by the same family for six decades, was drawing significant attention from non-traditional land-holders looking to secure a position in Victoria's primary data centre growth corridor.

The emerging challenge for governments was balancing the economic opportunities associated with renewable energy and AI infrastructure against concerns farmland, water resources and local decision-making.

Senator Shoebridge, in his first full week leading the Greens, said the party remained committed to electrifying the economy but would now cast the magnifying glass across the potential impacts of all new legislation.

Mr Tehan said the remarks were a "good start" and referred to former Greens leaders Bob Brown and Christine Milne recently calling for the brakes to be applied to the rollout and pointed to concerns in his own electorate of Wallan in south-west Victoria.

"The Brolga is under threat and there have been wind farms rolled out that have further endangered the Brolga," he said.

"There is a proposed wind farm near a Ramsar wetland in my electorate which has once again raised serious environmental considerations."

The Nationals have already introduced the Prime Agricultural Land Protection Bill 2026 in the House of Representatives, arguing Australia's most productive farmland requires stronger protection from competing land uses.

Independent Calare MP Andrew Gee introduced similar legislation last year , arguing it "defies belief" that large renewable infrastructure and other developments continue to be proposed on productive agricultural land.

However, it was voted down by the major parties.

National rural affairs writer covering federal politics, agri-politics and life in the regions. Winner of several Clarion Awards, including best news report, the 2025 Australian Council of Agriculture Journalists Star Prize and two National Rural Press Club awards. Send story tips to [email protected]

National rural affairs writer covering federal politics, agri-politics and life in the regions. Winner of several Clarion Awards, including best news report, the 2025 Australian Council of Agriculture Journalists Star Prize and two National Rural Press Club awards. Send story tips to [email protected]

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