The crucial role of data centres in our economy and the challenges they face

Behind every click, stream and cloud-stored file is an unseen powerhouse: data centres. As Australia’s digital presence grows, so do the opportunities and challenges for the infrastructure that keeps it running.

Data centres are the backbone of our digital economy, enabling, sustaining and supporting both existing and emerging industries. They are essential for our economy to thrive, providing the infrastructure needed for everything from cloud computing to online services.

Despite this crucial role, data centres face mounting obstacles that could stall our digital economy if left unaddressed. However, these challenges also present unique opportunities for innovation and growth.

One of the most well-understood issues is the availability of power. In Victoria, for example, it typically takes AusNet around four years to provide the necessary 220kV infrastructure to a site, at a cost of approximately $20 million per kilometre of line built – a lengthy process.

Data centres also consume a significant amount of energy. Ultimately, it is we, the end users, who drive this demand with our digital lives and an economy heavily dependent on the IT systems housed in these centres.

But power and energy are only half the battle – a less discussed but equally important challenge is water supply and availability.

Water is a critical component for the operation of data centres. In Melbourne alone, 45 facilities are currently operating using approximately 50 litres of water every second – that’s the equivalent of filling an Olympic swimming pool in under an hour.

With 25 more facilities proposed to be built, that number could skyrocket to between 100 and 500 litres per second.

VicWater estimates that the total projected peak water demand for current and proposed facilities is around 3000 litres per second – this is equivalent to the demand of 100,000 homes or the entire city of Geelong.

This astounding figure raises some important questions. Where will all this water come from? How will these facilities dispose of wastewater into the sewer network? What sustainable options are available, like using recycled or grey water? An understanding of the relationship between operation, energy and water, as well as innovation and collaboration with the water industry, is key to achieving the most sustainable and energy efficient results possible.

Like all major construction projects in Australia, data centre developments face rising labour and material costs, a shortage of experienced personnel and lengthy delays in procuring critical equipment from overseas suppliers.

As demand for data infrastructure surges, these pressures are only set to intensify, making it even harder to deliver projects on time and within budget. Compounding the issue is the specialised nature of data centre design and construction, which requires a skilled workforce.

Australia has overcome similar challenges in the past, however, most notably during the mining boom. The key lesson? We need proactive planning, strategic workforce development and industry collaboration.

When discussing data centre design and efficiency, there is always a trade-off. A pragmatic, project-based approach is needed to propose the most appropriate solutions that meet local constraints and work within the local environment. Collaboration and coordination among industry stakeholders are key to this process.

Planning, designing and delivering infrastructure is a long-term process that requires long-term thinking. Developments cannot expect to receive megawatts of power and gigalitres of water for their facilities in a matter of months – it takes years. Engaging early in the planning process is crucial to ensure the timely delivery of critical infrastructure.

Australia’s data centre sector is already evolving, showcasing how these challenges are catalysts for innovation – from emerging sustainable data centre projects growing in popularity and government policies like the Net Zero in Government Operations Strategy supporting the evolution, to the emergence of AI-driven economy value added outcomes as viable solutions. The change isn’t coming – it’s here.

For too long, we’ve treated data centres as an afterthought – essential but overlooked. It’s time for industry leaders, policy makers and communities to work together driving strategic planning, bold investment and policy reform to sustain Australia’s digital economy.

By addressing these challenges head-on and seizing the opportunities they present, we can ensure a robust and resilient digital future.