The NSW government released its data centre policy framework on Monday, offering proponents an assessment commitment of 75 days if they meet six conditions, and opening consultation on making operators pay for the electricity network upgrades their connections require.
The demand behind the policy is set out in the government's own consultation paper from March. It cites Australian Energy Market Operator forecasts that data centres will draw 11 per cent of the state's grid supplied energy by 2030, up from 5 per cent in 2026. Every NSW government building and all of Transport for NSW together account for 4 per cent.
There are 19 data centre projects worth $50.3 billion in the state significant development pipeline, and more than 60 data centres already operating or under construction. Investment in the sector has grown about 75 per cent a year on average over the three years to December 2025.
The framework has three parts. Guidelines set six conditions a proponent must meet to get the 75 day timetable. Two of them carry the cost: a project must impose no net cost on consumers and communities, and must fund the additional water and energy supply it needs. The rest cover environmental and efficiency standards, local infrastructure and amenity, supply chain investment, and training.
Legislation has been introduced to allow the cost of additional network investment to be recovered from operators. The Independent Pricing and Regulatory Tribunal will review what it costs to supply data centres with water.
“As demand for data centres increases, NSW will ensure the infrastructure needed to support them grows with it," Minister for Climate Change, Energy and the Environment Penny Sharpe said.”
The energy pillar arrives after the network businesses told a parliamentary inquiry that most of those costs are already carried by the connecting customer. The NSW distribution networks told the Legislative Council's public accountability and works committee that a load such as a data centre must pay the full cost of connecting to their network. That is not the case in every jurisdiction, they said, and in some the cost is spread across all consumers. Their tariffs are designed to recover 100 per cent of the cost of a connection plus a share of the fixed costs of the existing network.
The same submission names the gap. Data centres that connect at the transmission level would not currently pay their contribution towards the NSW electricity infrastructure roadmap, the jurisdictional charge that other connected customers carry.
Transgrid, which runs the high voltage network, told the inquiry it had received connection enquiries totalling more than 10 gigawatts of potential load, with about 6 gigawatts progressing through to a formal application. Individual facilities seeking a transmission connection run from 250 megawatts to more than 1,200, with an average near 650.
Not all of that demand is real. Ausgrid has removed more than 3 gigawatts of speculative demand from the application stage of its connections pipeline, about 30 per cent of the total, after tightening how it validates applications.
The size of a single site has moved as well. Average requested capacity has risen from about 30 megavolt amperes to more than 100. The largest existing industrial load on the Ausgrid network draws around 30. In Western Sydney, the distributor Endeavour Energy is seeing sites reach their full load within one to two years rather than the five to ten it has planned around.
On water, developers already fund the full cost of pipeline augmentation that directly benefits their site, and pay developer contributions set by IPART. The March paper records a problem underneath that arrangement: credible forecasts of how much water the sector will need differ, with Sydney Water's numbers departing from those in a report commissioned by the data centre industry.
The committee that took the network evidence has not reported. It was established in January, took submissions until March and ran hearings through July. Consultation on the energy reforms closes on 14 September, and the regulations that would set how any access scheme operates have not been written.
