Australia’s data centres should be built near waste treatment plants to avoid using drinking water to run the thirsty facilities, according to one of the country’s leading experts in stormwater treatment.

The Commonwealth unveiled last week its 37-page National AI Plan which sets out a road map to drive the development and adoption of artificial intelligence by bolstering investment in skills training and data centres that store servers.

The United Nations Environment Programme has stressed that data centres “consume large amounts of energy and water, and we know that consumption is only going to grow” around the world.

University of Melbourne’s Professor Tim Fletcher, an urban ecohydrologist, said governments needed to start planning now because Australia was already drought-prone and water scarce.

The World Economic Forum estimated a one-megawatt data centre could consume up to 25.5 million litres of water each year just for cooling, comparable to the daily water use of about 300,000 people.

The International Energy Agency estimated data centres would drive more than 20 per cent of electricity demand between now and 2030.

Australia’s data centres consumed about four terawatts of electricity in 2024, about two per cent of grid-supplied power, and electricity demand from these users was expected to triple by 2030.

Australia saw the world second largest investment in data centres last year, behind only the United States, with about $10 billion spent.

Professor Fletcher pointed to the challenges ahead.

“First of all is what water will we provide to data centres? And then the next question that flows from that is, well, therefore, where should we put them?” he said.

What do we know about data centre water use?

These centres are physical facilities that store and run IT infrastructure, such as software and data.

The key components include routers, firewalls, storage systems, and servers, and requirements elements include an uninterrupted power supply and a cooling system.

Australia has more than 250 data centres and most are located in the most populous cities — Melbourne and Sydney.

Water is required to cool the servers.

For example, a one megawatt (MW) data centre consumes about 25.5 million litres of water a year for cooling .

A hyperscale data centre, specifically used for AI, has the capacity of about 100MW or more. It consumes the same amount of power as 100,000 homes annually.

Sydney and Melbourne Water authorities are already contending with the potential increased water consumption by data centres.

In July, Greater Western Water was assessing 19 data centre applications that requested to use nearly 20 gigalitres of water a year, on par with the water usage of 330,000 Melburnians.

The water body said it currently had about 21 data centre proposals across stages of development.

“We assess each proposal to ensure any new development is sustainable, and does not negatively impact existing customers,” said Ian Burton, general manager of asset planning and delivery at Greater Western Water.

Sydney Water has projected that data centres could use about a quarter of the city’s annual drinking water by the end of the decade.

University of Sydney’s Professor Stuart Khan, who specialises in urban water management, drew a comparison with green hydrogen.

“Understanding where the water’s going to come from reliably is going to be a key thing for data centres in terms of where we approve their locations, just as it would be for energy.”

Could we better utilise existing water supplies?

Professor Fletcher said there were alternatives to using drinking water to cool data centres.

He suggested greater focus on reusing wastewater and building data centres close to treatment plants.

He pointed to the example of one treatment plant in Werribee, in Melbourne’s west, which was responsible for processing about 50 per cent of the city’s wastewater

“If you get the planning of where these things are built you could have a really large supply of water that’s having no impact on our potable water security,” he said.

“And indeed it reduces the amount of water we have to discharge to the environment, in the case of Werribee, to the ocean.”

Professor Fletcher believed investment in stormwater storage could also be an option.

“Wastewater is much more readily available,” he said.

“Stormwater would take more investment, but the wastewater is right there and could be grabbed right now at very, very low cost.”

Melbourne Water said it was exploring opportunities to use recycled water for data centres.

The water body’s executive general manager, Chris Brace, said it was working with the data centre sector to understand its plans for growth.

One of the companies working on providing recycled water is Hydroleap, which operates across the Asia-Pacific region including in Singapore and Australia.

Chief executive Mohammad Sherafatmand, an environmental and chemical engineer, said wastewater from treatment plants was ideal for data centres.

But there were other options, such as breweries, which could provide water.

“[At a] minimum per litre of the brews that get generated there are nearly five to six litres of wastewater … so you are talking about a big source of water,” he said.

“What happens currently to it … [is] a very, very minimal treatment and just spread it out on agriculture.”

How are data centres managing water consumption?

There are two types of cooling tower systems used in data centres, closed and open loops.

Open loop systems consume more water but use much less energy, according to Dr Sherafatmand.

The National AI Plan pointed out CDC Data Centres’ use of closed loop cooling.

“CDC is … a leader in water conservation, with its closed-loop LiquidCoreTM cooling system consuming near-zero water, saving billions of litres of water annually across 16 CDC-operated data centres in Australia and New Zealand,” the report said.

It has plans to build three more, including one in Sydney which will be the biggest data centre campus in the Southern Hemisphere.

A spokesperson for CDC Data Centres said site planning was a complicated process which required taking into consideration environmental, customer and commercial factors.

“In other words, CDC’s facilities are similar to other commercial properties, where water consumption is a function of the number of people occupying that facility.”

University of New South Wales’ Scientia Professor Toby Walsh said the closed loop cooling system helped reduce water consumption.

The technology is estimated to save between 50 and 75 per cent of water used by data centres.

“If you’re willing to build and put the effort in and spend a bit more money on energy you can use closed water cycle cooling systems where the water is recirculated,” he said.

“Once it’s taken the heat away then you bring the water back.