Residents across Sydney's suburbs are increasingly confronting the reality of living alongside data centres—massive, windowless facilities that power artificial intelligence and cloud computing. In Lane Cove, a desirable neighbourhood on Sydney's lower north shore, locals are expressing deep concern about four new data centres planned for the industrial park, raising questions about whether the nation's rush to become a global AI hub can be achieved sustainably.
The facilities themselves are difficult to ignore. Residents describe the noise as resembling a jet plane preparing for takeoff, while others report a persistent high-pitched whine. One parent, Lucy, hears constant humming from a data centre located just 350 metres from her home. Another four are in the pipeline at the local industrial park, and according to recent reporting, up to five data centres could eventually operate within earshot of homes, schools and the Lane Cove River.
Australia has rapidly emerged as a prime destination for data centre investment, attracting global technology companies through its abundant clean energy resources, natural gas reserves, and available land. Earlier this year, OpenAI's CEO Sam Altman suggested Australia could become a data centre capital of the world if it chose to pursue that path. The country now hosts 162 data centres with plans for 90 more, backed by an estimated A$155 billion (£80 billion) in investment capital. If approved, one of the world's largest data centres will be constructed in western Sydney, operating at one gigawatt and expected to become Australia's single largest energy consumer. In Marsden Park, also in western Sydney, the Southern Hemisphere's biggest data centre is already under construction just 100 metres from a local community.
Why the sudden expansion?
Data centres have underpinned the digital economy since the internet's emergence, originally processing and storing information for email, online banking and cloud services. The landscape transformed dramatically after 2022 when ChatGPT launched and artificial intelligence exploded in popularity, triggering a global race to build infrastructure capable of powering these technologies. The physical location of these facilities became strategically important for latency—the time required for data to travel from source to destination. Delays in applications like air traffic control, robotic surgery or streaming services are no longer acceptable in modern systems.
Australia represents an attractive market for this expansion. The nation has roughly 13.6 million monthly AI users, making it the sixth most active globally. Belinda Dennett, CEO of Data Centres Australia, argues that local infrastructure is essential for economic development.
If we think about it in reverse, what happens if we don't build infrastructure here. We get none of the value chain, we are just importing tools from someone else and we become just a user.She points to Australia's political stability, Five Eyes security alliance membership, skilled workforce, stable energy grid and renewable energy potential as competitive advantages.
Leading business experts and economists contend that Australia's data centre boom over recent years has prevented the nation from entering recession. Jon Whittle, a former director of the digital research centre at Australia's national science agency CSIRO and now a prominent voice in AI and business strategy, believes the government has limited choice but to continue down this investment path.
There's some very serious considerations around this, but my main message would be we need to lean into it.
NSW Treasurer Daniel Mookhey reinforces this position, arguing that data centre investment is being accompanied by renewable energy expansion.
We don't see the two as unrelated. We see data centres allowing us to replace a lot of our old coal-fired power with clean, green renewable energy with the private sector picking up a large amount of the tab because otherwise households would.He suggests the private investment will support renewable energy development and create industries likely to employ future generations.
What are the environmental and energy concerns?
Energy and environmental experts argue Australia lacks sufficient capacity to meet the massive power demands these facilities will generate. The Australian Energy Market Operator projects data centre energy consumption could triple by 2030 nationwide. Without significant new renewable generation and storage infrastructure, data centres could increase power prices by 26 per cent in New South Wales by 2035, according to the Climate Council, an independent non-profit providing expert analysis.
A critical challenge emerges from the nature of data centre power requirements. Because these facilities need uninterrupted electricity at scales and speeds that wind and solar generation cannot reliably match, there are concerns the current expansion will trigger construction of new coal and gas-fired power plants. In the United States, many data centre operators have found it cheaper to build new gas-fired power stations than to wait for renewable energy infrastructure development. Just 90 minutes from Sydney's central business district, the Australian-owned Cloud Carrier plans to build three gas-fired power stations to generate energy for an existing data centre and two additional facilities planned for the future.
A recent analysis by Greenpeace Australia Pacific found that no data centre operator examined in their report adequately demonstrated their claims of driving renewable energy growth. Additionally, if energy demands strain the grid or power outages occur, data centres like the one in Lane Cove will rely on backup diesel generators.
Water consumption presents an equally serious concern. Data centres consume enormous quantities of water—some facilities use up to 40 million litres daily, equivalent to the consumption of 80,000 households—to prevent server overheating. In a drought-prone nation, this represents a potentially catastrophic problem. Sydney already requires increased drinking water supply over the next five to ten years to accommodate population growth, according to the Water Services Association of Australia. If data centres consume that water, households will likely bear the cost of sourcing water from alternative sources such as desalination, which costs significantly more than traditional supplies.
Sydney Water, Australia's largest water utility, estimates data centres could consume up to 25 per cent of Sydney's drinking water by 2035. Recent operational data underscores the scale of the challenge: according to reporting from 27 August 2026, NextDC's water usage effectiveness rose to 2.40 litres per kilowatt-hour in the year to June, compared to 2.25 a year earlier, while power usage effectiveness increased to 1.49 from 1.44, indicating rising resource consumption even as operators claim efficiency improvements.
In July, Prime Minister Anthony Albanese announced new legal obligations requiring large-scale data centres to underwrite power supplies, limit water use and pay for additional water infrastructure needed. However, the legislation, scheduled for introduction in 2027, will apply only to new proposals, not to projects already built or under construction. Environmental and community groups have responded by calling for a complete pause on data centre development.
What do local communities say?
Lane Cove Deputy Mayor Rochelle Flood articulates the frustration of residents who feel excluded from decisions affecting their neighbourhood.
We've got the government rolling out the red carpet saying we want to be the data centre capital of the world. But can we actually do that sustainably or is it going to set us back in terms of net zero and our water storage targets?
At a town hall event led by Greenpeace Australia Pacific at the Lane Cove library, locals expressed anger at not being consulted about their area becoming a data centre hub. One of the proposed facilities sits just 16 metres from the nearest home and 160 metres from a local primary school. Lane Cove Council has noted that the proposed facility at 12 Mars Road is a 24/7 operation close to homes, and that its noise assessment is based on assumed equipment rather than confirmed specifications.
The economic impact on existing businesses raises additional concerns. If the four data centres receive approval, approximately 50 per cent of current businesses in the industrial park will be forced to relocate, taking their jobs with them. Felipe Tanaka, a 40-year-old manager of a business in the industrial park who has been told he must relocate, expressed dismay at the sudden disruption.
We never knew that something like this would happen. Thousands of jobs are going to be gone from this area in the next few years.While a large data centre can employ more than a thousand workers during construction, employment drops to approximately 100 jobs once the facility becomes operational. Tanaka notes that his business employs 300 to 400 workers, mostly local residents.
Having to move will probably see half of my employees gone.
NSW Treasurer Mookhey counters that employment benefits from data centres derive not from those working within the facilities but from companies using them. He points to Microsoft and Amazon locating skilled operations in New South Wales as evidence of job creation potential. However, what specific skilled positions might emerge remains unclear, and the actual purpose of much data centre capacity is contested. Critics have highlighted that many AI applications generate trivial outputs—some users create cat GIFs, which consume energy equivalent to running a microwave for an hour.
Flood articulates the frustration of many residents:
They're telling us this is essential... that we need to have these centres in our neighbourhood but they're not saying what it's for. When our drinking water, energy and land is being used for generative AI slop, that is not giving any value back.
What happens next?
Goodman's Lane Cove West proposal is progressing through the NSW planning process following the Environmental Impact Statement stage, with community consultation webinars scheduled for 11 and 13 August 2026. The 12 Mars Road facility, known as Project Mars (SSD-82052708), remains under formal assessment as a State Significant Development project. Lane Cove Council's data centre page identifies this as an active major project in Lane Cove West, alongside existing and proposed facilities from AirTrunk and DC Alliance, meaning the suburb faces potential expansion of data centre operations significantly beyond current levels.
The tension between Australia's ambitions to lead in artificial intelligence infrastructure and the legitimate concerns of communities bearing the environmental and social costs remains unresolved. As more Australians find themselves living adjacent to data centres, the nation faces a critical question: whether the economic benefits of joining the global AI race justify the demands placed on local water supplies, energy grids, existing businesses and quality of life.
