Sydney Councils Warn Data Centre Boom Is Set To Strain Housing And Utilities

Data centre growth is squeezing housing opportunities and outpacing electricity and water networks in Sydney, a New South Wales parliamentary inquiry has heard.

Across the city, councils warn the surge in applications is pressuring the systems needed to support it, with the industry already reshaping suburbs and impacts felt across energy, housing and amenity, according to The Guardian.

NSW now hosts more than 90 data centres, with about $41 billion in developments still under assessment across the state, with many concentrated in western Sydney.

Lane Cove Council says residents are reporting brief outages and fluctuation, expressing “concern about brownouts and blackouts increasing in Lane Cove West since the expansion of data centres”.

Noise was also flagged, with the council warning it could be “offensive and disruptive” for nearby residents and wildlife, along with the use of back-up diesel generators.

In Ryde, that tension is playing out in land use.

Council says data centres are competing with housing near major transport links, pointing to a cluster of twelve facilities in Macquarie Park.

Pressure is also emerging in the housing pipeline, with some approved projects delayed due to strain on water supply.

Councils say “Sydney Water has been unable to meet the required water supply capacity”.

Further west, Penrith City Council has called for a break on new approvals until “utility servicing (water and power) impacts for NSW in both the short and long term are fully understood”.

The Western Sydney Regional Organisation of Councils says the combined impact of multiple data centres is being underestimated when assessed individually, “especially in heat-vulnerable communities in western Sydney.”

Without coordinated planning, they warn growth could compound pressure on electricity grids, water systems and local environments, while limiting housing and infrastructure delivery.

City of Sydney deputy lord mayor Jess Miller said if every proposed data centre went ahead, they would require about 4.4 gigawatts of power—equal to the electricity use of 10 million households—and up to a quarter of Sydney’s drinking water by 2035.

The Australian Energy Market Operator expects datacentre demand to more than double in NSW over the next decade, rising from about 5 per cent of grid load to 11 per cent by 2030.

Water use alone is projected at 250 million litres per day, similar to the output of the Sydney Desalination Plant, which says it could expand to help meet demand.

Data Centres Australia said developers are investing in renewable energy agreements and exploring alternatives to drinking water, but cited cost and supply constraints.

“Non-potable recycled water represents an opportunity for data centres but we need Sydney Water to make recycled water available at an affordable price,” the industry body said in a statement.

“There are things we need to do to ensure we have the energy availability in the grid to support the increased capacity, but we should not be panicking – we have a window of opportunity to address the system weaknesses like building more transmission and more firming like battery storage.”

The debate comes as the federal government introduces “national data centre expectations”, while a NSW inquiry continues examining the sector’s impact on land use, housing and communities, with further hearings due in May.

The Committee for Sydney said the state still lacks an “overarching spatial strategy for data centre deployment”.