Google and Microsoft have backed the development of nationally consistent rules for Australia’s burgeoning data centre sector, but are calling for flexibility in how operators meet new energy and sustainability requirements. In submissions, made to the Senate inquiry into artificial intelligence and data centres, two of Australia’s largest hyperscalers were broadly behind the push for a national regulatory framework, but also set out limits on how prescriptive those rules should become.
Microsoft currently has 29 data centre sites in Australia and has committed AU$25bn through 2029 to expand its Australian AI and computing capacity. It said the government’s existing Data Centre Expectations framework provides the right foundation for nationally consistent regulation.
Google also called for “clear, consistent and durable national settings” for data centre investment, arguing that hyperscale projects involve 20- to 30-year commitments and require confidence that regulatory settings will not materially change.
But both companies are pushing for an outcomes-based approach rather than a rigid set of technology or operational mandates.
Flexible approach to clean energy
Microsoft said it supports the principle that new large electricity loads should contribute to additional renewable generation, while arguing that the rules need to account for the timing of projects and investments already made. It said renewable energy requirements should recognise clean energy projects that have already been developed to support future data centre loads, rather than effectively resetting requirements when new regulations take effect.
Microsoft also wants flexibility around when renewable generation comes online, citing the lengthy development, transmission and connection timelines for new projects. The company also argued that demand flexibility should be encouraged through market-based mechanisms rather than fixed mandatory requirements, with protections for critical digital services.
Firming obligations should “remain technology-neutral and proportionate to demonstrated system needs,” Microsoft said, allowing operators to combine renewable generation, storage, firming and transmission investments according to the circumstances of each project.
Google’s recommendations call to “strengthen the integration between data centre development and Australia’s energy transition,” including frameworks that “enable data centre investors to fund net new renewable generation as part of their development.”
Google argued it already pays for 100 percent of the electricity consumed by its data centres and is investing in clean energy supply, while arguing that data centres can in some circumstances act as demand-management assets for the grid.
Both push back against fragmented regulation
Microsoft’s submission is particularly critical of Australia’s current state-by-state planning environment. It said data centre developers face lengthy and unpredictable approval processes, materially different requirements between jurisdictions and, in some cases, limited specialist expertise within assessment bodies to evaluate technologies such as advanced cooling and grid integration.
Microsoft recommended “dedicated, streamlined assessment pathways for major data centre projects, with statutory timeframes, clear decision criteria…and access to specialist technical expertise.” It specifically welcomed NSW’s Investment Delivery Authority process.
It also argues that new requirements should generally apply prospectively, with appropriate transition arrangements for projects “already committed or progressing through approval and connection processes.”
Microsoft similarly said new obligations should be matched by reforms that “improve connection processes, increase network capacity and provide greater certainty around infrastructure planning,” warning that without this a national framework risks fragmented or duplicative state and territory requirements that increase costs and discourage investment.
Water rules should focus on outcomes
The companies also broadly support tighter water stewardship, but again argue against prescribing a single technical solution. Microsoft said regulation should protect watersheds and community water resources while allowing operators to choose the cooling and water-management technologies appropriate to local conditions.
It specifically supports “closed-loop and low-water systems,” but said governments should regulate outcomes “without mandating a single cooling architecture.” It also argues that water impacts should be assessed against “water availability… and competing demands,” rather than a single national threshold.
Microsoft says its latest data centre designs include closed-loop “zero-water-for-cooling” systems and that it is committed to becoming water positive globally by 2030.
Google has made a similar commitment to reducing freshwater use, saying new Australian data centres should use designs that “combine highly efficient air-cooling systems with internal closed-loop liquid-to-chip cooling.” It also applies a water-risk framework to assess local watershed health and water scarcity when choosing technologies and has an ambition to replenish more water than it consumes at its sites.
A bigger role for data centres in energy
The submissions land in the face of government efforts to develop a common framework for an industry whose electricity demand is growing rapidly. Microsoft said data centres should contribute positively to Australia’s clean energy transition and ensure communities do not bear additional electricity costs from their development. It said its Australian renewable investments include 868MW of contracted capacity, of which 478MW was actively supplying the grid at the time of its submission.
Google pointed to its partnership with AirTrunk and European Energy on the 25MW Mulwala solar farm in the Riverina as an example of data centre investment supporting new renewable generation.
Both companies ultimately argue that Australia needs to move quickly while avoiding a regulatory environment that makes long-term infrastructure investment unnecessarily difficult. Google recommended accelerating planning and environmental approval pathways while maintaining environmental and community standards, and called for recognition of hyperscale digital infrastructure as a strategic national asset.
The submissions together have demonstrated that major data centre investors prefer national rules over a patchwork of state requirements. However, they also showed the hyperscalers want flexible, technology-neutral compliance over prescriptive requirements around how individual facilities source, generate or manage energy and water.