From Milk to Megawatts: Is the Data Centre Industry Hitting Its Environmental Limits?

The NSW Government’s decision to halt new data centre developments in Macquarie Park shouldn’t come as a shock. It’s part of a broader national shift, echoing the Australian Energy Market Operator’s (AEMO) calls for tighter regulation of where and how data centres operate.

This is no longer just about digital demand or real estate. It’s about energy security, urban resilience, and infrastructure equity.

Licence to Grow vs Licence to Operate

For years, I’ve thought of a licence to grow as the stepping stone to a licence to operate. Lose the first, and the second can quickly follow.

I’ve seen this in two very different industries. When I was Head of Sustainability for Fujitsu’s data centres, I watched the sector’s rapid expansion outpace conversations about environmental limits. Later, at Fonterra, I saw the reverse: in New Zealand, you cannot simply start a new dairy farm.

From Dairy Herds to Data Racks

New Zealand’s dairy industry went through a boom much like the one we’ve seen in Australian data centres. From 1990–91 to 2017–18, the national dairy herd more than doubled from 2.4 million to 5.0 million cows driven by demand, expanded land use, and better productivity.

But environmental limits eventually caught up. Water use, nutrient runoff, and emissions triggered strict regulations. By 2022–23, cow numbers had fallen to around 4.7 million, and new dairy conversions now require intensive environmental approvals. Even the few approvals granted recently like four in Canterbury in early 2025 covering just 2,730 cows are the exception, not the rule.

The lesson? Growth continues until it collides with physical, environmental, or social limits then the rules change.

The Data Centre Boom Is on the Same Path

Here in Australia, data centres have enjoyed an unchecked boom consuming vast amounts of grid energy, water, and emissions capacity, largely without systemic limits.

Now, with NSW’s Macquarie Park decision and AEMO’s scrutiny, we may be seeing the first signs of the industry hitting its environmental and social ceiling.

The parallels with NZ dairy are hard to ignore:

• Environmental capacity has limits once reached, expansion is restricted.

• Public trust matters lose it, and your operating freedom shrinks.

• Licence to grow can vanish and with it, the licence to operate if adaptation doesn’t happen quickly.

We’ve Seen This Coming

Years ago, during Sydney Climate Week and more recently at a Digital Sustainability event, I warned that the explosive growth of data centres now turbocharged by AI was colliding with other urban priorities like housing, hospitals, and schools.

When I was at Fujitsu, that clash was already obvious. It’s why we backed the business case for NABERS Data Centre Ratings a first step towards accountability.

A Personal Perspective

In 2013, I was part of the team that secured Fujitsu’s first NABERS rating for its Melbourne facility. We went on to rate the entire Australian portfolio a commitment that still holds today.

But looking at the NABERS register now, the picture is sparse: only 15 rated data centres nationwide. Australia has over 200 data centres possibly closer to 300 depending on how you count colocation and hyperscale sites. That means just 5–7% of all data centres in the country hold a NABERS rating.

A handful of names Metronode, Digital Realty, NextDC, Equinix, Fujitsu are there. Where’s everyone else?

Minimum Expectations Are Rising

If the industry wants to avoid a dairy-style clampdown, it must act now. In the near future, the baseline will be far higher:

• Mandatory NABERS Data Centre ratings

• Credible net zero strategies

• Closed-loop water systems

• Transparent emissions reduction plans

• Integration into emergency response plans freeing power for critical services in a crisis

The Regulatory Reckoning Is Here

The Australian Sustainability Reporting Standards (ASRS) will soon require large organisations to publicly disclose emissions and climate-related risks. Within 12–24 months, transparency won’t be optional and those disclosures will need to account for local constraints like energy, water, and the fragile social licence to operate.

From Milk to Megawatts, Will We Learn the Lesson?

True sustainability isn’t just about hitting carbon and water targets. It’s about stepping up to systemic responsibility.

If the data centre sector wants to keep its licence to grow and eventually its licence to operate it must lead the change before regulation locks in its limits.

The dairy sector learned this the hard way. The question is: will data centres?