August 25, 2026, (Inside AI) — A wave of datacentre construction may hit Australia before new federal rules take effect, as developers race to secure approvals under existing state laws. The proposed regulations, championed by Prime Minister Anthony Albanese, would require new sites to add renewable energy to the grid, pay their own connection costs, and minimize water use.
The prime minister aims to reach an agreement with the national cabinet on Wednesday. The rules would also force developers to avoid building near schools, homes, housing, or agricultural land. But the legislation is not retrospective, so projects approved before it passes next year would escape the new requirements.
This timing creates a clear incentive for developers to fast-track applications. Industry experts warn that a rush of approvals could lock in datacentres that fail to meet the coming standards, leaving communities with long-term environmental and infrastructure burdens.
Race to Beat the Regulatory Clock
The Australian Energy Market Operator reported 225 datacentres in development, with electricity demand projected to jump from 5 to 34 terawatt hours by 2036. More than 40% of projects from the 2025 report have already dropped off or regressed, but many remain in the pipeline.
One high-profile example is Project Mars, a 90MW datacentre proposed about 9km from Sydney’s CBD. The three-storey, 22,000sqm facility would sit near the Lane Cove River under current plans. Developer Goodman Group is consulting the community amid strong local pushback, with five datacentres already approved or proposed in the area.
The project’s website says it will use existing power and 3.5ML of water daily from Sydney Water. It plans 200kW of rooftop solar but offers little detail on additional renewables, stating it is “exploring opportunities to source additional renewable generation to support its proposed datacentre rollout in Australia.”
Prof Crystal Legacy, an urban planning researcher at the University of Melbourne, said developers would likely try to get in “before the new regulatory levers come into play.” She warned that state governments fast-tracking applications would do so “at your political peril.”
“People are now noticing, and there’s always going to be a political backlash,” Legacy said.
“We call people Nimbys, but I think that’s an unfair characterisation for people who are just concerned about the environmental impacts, as well as the amenity impacts of these massive datacentres.”
Community Pressure and Calls for a Moratorium
Sasha Titchkosky, a representative of the Lane Cove Responsible Planning group, said developers should weigh brand damage if they proceed under old rules. She urged governments to halt approvals until the new rules are in place.
“At the very least, a moratorium on approvals in established residential areas ... [it] seems to me that would be the responsible thing for governments to do,” Titchkosky said.
“I don’t think it’s an unreasonable ask, to actually have the government doing what they should be doing to protect the citizens.”
The Greens have previously called for a moratorium. A federal inquiry into datacentres is accepting submissions, alongside state inquiries in New South Wales and Tasmania. The outcome of Wednesday’s national cabinet meeting will determine how quickly the new rules can be locked in, but the approval window remains open for now.
