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Holding Redlich examines Australia’s proposed framework for data centres and AI infrastructure

Holding Redlich reviews Australia’s proposed framework for AI and data centres and its implications for developers and investors.

Holding Redlich has published an analysis of the federal government’s proposed national interest framework for data centres and AI infrastructure, outlining how the new policy direction could affect developers, operators and investors in Australia’s expanding data centre sector.

The framework introduces key areas of consideration for future regulation and project approvals, with a focus on energy, water, infrastructure and local economic outcomes.

Five key expectations for data centre and AI infrastructure projects under the national interest framework

1. Prioritise Australia’s national interest

Projects should align with Australia’s strategic, economic and sovereign data objectives. Projects that demonstrate a clear public interest or broader economic benefit may be more favourably considered in the government’s approval process.

2. Support Australia’s energy transition

Developers are expected to consider how projects may reduce pressure on the power grid and limit additional impacts on electricity costs. The expectations are three-fold:

• underwrite or develop energy with renewables;
• internally finance required grid connections;
• participate in demand-flexibility programs, for example, shifting grid usage depending on the availability of the grid and grid connections.

3. Use water sustainably and responsibly

Given the significant water usage required to regulate temperature in data centres, operators are expected to adopt technologies and practices that promote sustainable water management.

4. Invest in the Australian skills and jobs markets

Projects are expected to contribute to the development of local skills and employment opportunities. This could include structured training pathways and targeted initiatives to address skills gaps across both construction and operation of data centres.

5. Strengthen research, innovation and local capability

Operators are expected to support Australia’s innovation and research ecosystem. They are also expected to support sovereign digital capability and reduce external dependencies where relevant.

Implications for data centre developers, operators and investors

The government’s national interest framework responds to the rapid expansion and resource intensity of the AI and data centre sector. It provides guidance for operators and investors whose projects align with public policy priorities relating to power, water and the local jobs market, while also addressing sovereign capability considerations.

For those with an interest in data centres and AI, the framework provides guidance for projects at an early stage of development. It may support business planning, budgeting and contractor appointments, while helping inform the overall regulatory path to approval.

Navigating Australia’s approval process

With Australia’s current decentralised approval model involving state and territory planning authorities, local councils, the federal government and other state-based major project agencies, the framework may assist operators as they navigate the approval process and respond to increasing regulation in this sector.

Source: Holding Redlich