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Victoria introduces strict rules to force data centres to self-power

25 Sep, 2026



The Victorian government has introduced the country’s most stringent planning and operational standards for new data centres, forcing tech operators to source their own renewable energy, preserve local water supplies, and maintain strict separation distances from residential neighbourhoods.

The regulations target the booming digital infrastructure sector, which delivered AU$5.8 billion in capital expenditure to Victoria last year, to ensure rapid expansion does not compromise grid stability or drive up household power bills.

Under the state’s new Sustainable Data Centre Action Plan, developers must match all new energy demand with dedicated renewable generation and storage, as well as cover all network connection and upgrade costs.

In addition, the plan bans the use of drinking water for facility cooling, requiring operators to use recycled or non-potable water, pay for necessary infrastructure, or offset any usage.

To safeguard local communities, data centres will be strictly prohibited in residential zones, as well as near schools, childcare facilities, and vulnerable regional areas.

Industrial developments must maintain a mandatory 150-metre buffer zone from homes, a distance greater than the width of the Melbourne Cricket Ground, alongside strict traffic management plans during construction and operation.

“In Victoria, we set the rules – data centres must power themselves, protect homes and pay their way,” Premier Ben Carroll said, adding that proper regulation ensures the whole community shares in the economic windfalls.

The plan also introduces a mandatory Local Investment Guarantee. New projects will be required to partner with local employment services, train Victorian workers, and directly fund community initiatives such as TAFEs and public parks.

Minister for Artificial Intelligence and the Digital Economy Anthony Carbines noted that major global firms like Amazon and Microsoft would continue investing in Victoria under these “sensible guardrails”.

The regulations will not apply retrospectively to applications currently under assessment, though existing noise, fire, and safety compliance standards remain enforced.

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