25 data centres and 2.9 GW escape Australia's new AI rules

By James Dore · 2026-09-11

The 25 projects and what they add up to

Australia has 162 operational data centres carrying roughly 1.4 gigawatts of IT load as of March 2026, a figure forecast to reach 3.2 GW by 2030. The 25 already-approved projects identified in a September 2026 investigation add up to about 2.9 GW of capacity, and not one of those projects will ever face a federal standard. That is nearly the entire projected national load for the rest of the decade, running permanently outside the rules.

The pipeline was already visible before the investigation landed. AEMO reported in June 2026 that 11 large-scale projects totalling 5.4 GW were moving through the National Electricity Market's transmission connection process, with roughly 60 per cent of that capacity in NSW and 40 per cent in Victoria.^[1] The 25 approved projects are a subset of a demand surge regulators have been tracking for months.

How the grandfather clause works

The Albanese government announced its Australian Standards for AI on 15 July 2026, requiring large new data centres to underwrite renewable energy generation, pay full grid connection costs, reduce consumption when the network is stressed and maximise water efficiency.^[2] Legislation is scheduled for introduction by early 2027.^[3]

The problem is the word "new". In a radio interview the day after the announcement, Prime Minister Anthony Albanese said the standards would apply only to new proposals. "This will be for new proposals. You can't retrofit. But as well, for many of the centres which are under construction tend to be smaller ones," Albanese said.^[7] At 2.9 GW in aggregate, the 25 approved projects will run for decades without meeting those standards.

"Already approved" matters because data centre developers lock in grid connection agreements, development applications and offtake deals long before construction starts. A project that clears those gates before the legislation passes is grandfathered by the government's own logic, regardless of when the building work finishes.

Nvidia's 2 GW deal

Two days before the investigation published, Nvidia announced a partnership with Australian data centre and cloud operators to expand AI infrastructure capacity by up to 2 gigawatts by 2027.^[6] Much of the compute behind that partnership sits in facilities already approved before the federal standards were drafted.

For Australian businesses renting AI compute, that is the consequence that matters most. The data centres they will actually use, the racks they will pay for, the cooling systems drawing from local water supplies: most of it will never be touched by the rules the government announced in July. Demand is growing fast, and the framework governing it is prospective only, so the existing pipeline runs free.

Water as the second front

Energy is only half the resource question. Large data centres consume significant volumes of water for cooling, and the federal standards include a water efficiency requirement, but that requirement applies only to new proposals, leaving the 2.9 GW pipeline to negotiate water access under existing arrangements.

NSW is trying to fill that gap separately. On 4 September 2026, the Independent Pricing and Regulatory Tribunal released draft terms of reference to review how water services to data centres should be priced and regulated, with submissions open until 2 October 2026.^[5] IPART chair Anthony Wing said the review would examine how water services to data centres should be priced and regulated to protect other water users while appropriately supporting investment that benefits NSW.^[5]

The NSW Government had already released its own Data Centre Policy Framework on 17 August 2026, setting energy, water and environmental performance expectations for future investment in the state.^[4] IPART's review runs in parallel, examining the pricing side of a question the policy framework does not resolve. The result is a patchwork: federal rules covering future projects, a state framework covering future projects, and a pricing regulator still working out the basics for projects already in the ground. IPART's submissions window closes on 2 October 2026.

James Dore

James Dore is founder and editor of Prompt the Market and Strategy Director at Bushnote, a Sydney strategy, SEO and AI search agency. He has a background in strategy, media and financial services, and led consumer product marketing at MONEYME. He writes on AI search, answer engines, technology policy and media economics.