Your every swipe, tap and click goes through one of these buildings. They are also driving the NSW economy

NSW is positioning itself as a world leader in attracting global investment in data centres, providing the ideal conditions for tech giants to help fund the clean energy transition, says Treasurer Daniel Mookhey ahead of the release of the state’s first major plan for IT super hubs.

Mookhey, who has championed NSW’s first blueprint for the vast warehouses responsible for every facet of digital life, says the state has emerged as a favoured location for the tech and cloud hubs thanks to a stable political system, a sophisticated financial sector and a well-educated workforce.

Significantly, Mookhey believes global interest in locating data centres and other digital technology in NSW can also help fuel investment in the state’s transition to renewable energy, reducing the amount taxpayers will be forced to spend by asking tech companies to contribute financially.

Mookhey calls it the “virtuous cycle”.

“I’m thinking about how we can solve two problems at once,” Mookhey said in an exclusive interview.

“If we get this right, what it means is NSW gets access to some of the world’s best technology for our economy, but we also are getting industry to pay for some of the capital investment that otherwise consumers would have to pay to fund the renewables transition.

“That’s the opportunity we are trying to seize.”

The federal government this week said it expected data centre developments to use water efficiently to stabilise server temperatures and support Australia’s move to clean energy without driving up consumer prices. Mookhey, meanwhile, will on Friday release NSW’s expectations for tech giants and the state’s plans for the ballooning industry.

NSW’s reputation for being a safe place to make large investments has stoked a data centre boom in Sydney; the city already hosts about 90, with a $3.1 billion data centre from CDC under construction in Marsden Park that will be the largest in the southern hemisphere.

A sprawling paddock zoned for industrial land just north of Western Sydney Airport is earmarked for Australia’s largest data centre, the 1GW Mamre Road Data Centre Campus. Six four-storey buildings will make up the core of the campus.

In addition, the state government’s Investment Development Authority has received proposals worth more than $70 billion for data centres and technology-related infrastructure.

The government has approved 20 state significant development applications for data centre projects since 2019, and a further 15 projects are in the development pipeline (35 overall). Of these 35 projects, 18 are located in western Sydney.

If all the data centre projects in NSW awaiting approval are successful, the investment will be worth more than $29.4 billion statewide, according to the government’s latest analysis.

Mookhey says Australia’s status as a “five eyes” security partner with the US is an added attraction to big tech investors.

“If you’re about to buy some of the world’s rarest and highly sought commodity – which is an advanced chip – and you’re about to spend $20 billion buying them, you don’t want to put them anywhere near a danger zone,” he says.

“There’s a lot of confidence in the fact that Australia, as a five eye security partner to the United States, is a safe destination to locate these incredibly valuable pieces of technology.”

Another factor, according to Mookhey, is the state’s high-quality global communications links.

“We actually have the world’s best cable connections to both Asia and the west coast of the United States,” Mookhey says. “Don’t underestimate the role of undersea fibre optics.”

But Mookhey’s virtuous cycle, where digital infrastructure and renewable energy feed off one another, comes with trade-offs and risks.

Data centres use a lot of electricity and water. Unless the supply of electricity and water rises to meet the increased demand, the boom could put upward pressure on power prices and water bills.

However, Data Centres Australia chief executive Belinda Dennett said it was critical that comparisons were not made with the American experience.

Dennett says the data centre industry in Australia needs to tell its story better because too often it is “depicted as energy vampires, water hogs and job killers”.

“The US has 5400 data centres and 53.7 gigawatts of capacity,” Dennett told an industry summit earlier this month. “Australia has 252 data centres, 66 of them under one megawatt and 1.4 gigawatts of total capacity. That is almost 50 times the difference.

“When people read about data centres straining the grid, driving up bills and consuming vast amounts of water, they are reading about America’s challenges, applied uncritically to an Australian market that bears almost no resemblance to it.”

The technology giants that own and use the state’s data centres will inevitably make demands on the state in return for major investments.

Data centres and housing developments will potentially compete for well-located land. The construction of digital infrastructure could also draw skilled construction workers away from residential work, slowing the supply of new homes.

Mookhey says he is determined to ensure NSW is a “premium destination” for high-quality investments in the state’s interests.

“We have a process to sift out the speculators from the serious,” he says.

Mookhey says the state will need more electricity generation in future regardless of the development of data centres.

“Whether it’s data centres or whether it’s electric vehicles, or whether it’s households, the future is going to need more electricity than the past,” he says.

“There’s no doubt that, if we want to help us solve a climate crisis, and incidentally make power cheaper for people in the long term, we need more clean green power.

“So from my perspective, ultimately that all turns on how fast we expand our supply … we actually want some of these big industrial power users to pay for some of the costs that otherwise households will have to pay for.”

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