The Victorian Government has released its Sustainable Data Centre Action Plan (Action Plan) which introduces new planning, renewable energy and community benefit requirements for data centres looking to operate in Victoria. These rules include separating data centre facilities from residential areas, new investment in renewable energy and storage that matches their energy use and contributing to local communities.
With more than 50 data centres operating in Victoria, data centres accounting for around 3% of electricity supplied through the National Electricity Market (NEM), and data centre electricity demand in Victoria almost doubling in the 12 months to June 2026, it is unsurprising that the Action Plan seeks to ensure data centre investments are well planned, manage resources responsibly and benefit their host communities.
Location and land-use requirements for data centres
Released on 22 September 2026, the Action Plan sets out land-use and location requirements to keep data centres away from homes and other sensitive uses by prohibiting data centres on residential zoned land and introducing a 150-metre buffer between a home and a data centre. This setback is a substantial change, given that some existing facilities in Melbourne’s west are only 15 metres away from homes.
The Action Plan will not apply retrospectively, so it will not affect projects already underway or being assessed. It will only apply to future projects.
Data centres will also be kept away from productive agricultural land by prohibiting them in rural zones. An exception applies where critical infrastructure capable of servicing the data centre, such as major transmission infrastructure, substations, renewable energy facilities, battery energy storage systems (BESS) or recycled water infrastructure, is nearby.
Noise requirements
Existing industrial and commercial noise limits, including a night-time limit, will apply to new data centres. Where multiple facilities affect the same location, their combined noise impacts will be assessed.
Renewable energy requirements
The Action Plan requires that electricity demand by data centres need to be met by new investment in renewable energy and storage that matches the data centre’s new energy demand.
Data centres in Australia generally run on power from the grid, with backup diesel generators. However, the transition to renewable energy is already well underway, with renewable energy developers and data centre operators increasingly collaborating through power purchase agreements.
Water supply requirements
The Action Plan seeks to protect drinking water supplies by requiring data centres to use recycled water or other non-drinking water sources to cool their facilities, or to transition to these sources when they become available.
Local jobs, training and community benefits
To maximise opportunities to support Victorian jobs, skills and training, the Action Plan requires data centres to provide apprenticeships and traineeships for construction and operational workers, support local suppliers and supply chains, and work with local training providers and employment services to hire local workers.
The Action Plan provides for the development of a Local Investment Guarantee to ensure a data centre development gives back to the community through local employment, skills development, training partnerships, engagement with First Nations communities, local procurement, or improvements to local parks or community facilities.
New referral authorities for data centre applications
WorkSafe Victoria, VicGrid, Fire Rescue Victoria and relevant water corporations will become referral authorities for data centre applications. They will join the Environment Protection Authority, which already holds statutory referral status for these developments.
What are the next steps?
It is anticipated that the Action Plan will be reviewed as conditions evolve. The next steps will include:
- development of detailed guidance on location, siting, design and built form, with stakeholder input, in 2027
- Commonwealth legislation setting standards for data centres’ use of energy, water and land, expected in early 2027 and to be developed with the states and territories
- a Local Investment Guarantee, to be developed with local government and industry
- planning scheme amendments to extend mandatory referral status to various regulatory bodies.
What does this mean for data centre developers and operators?
The Action Plan forms part of the growing regulatory framework for data centre developments in response to their rapid expansion in Australia. Melbourne is Australia’s second-largest data centre market and navigating this framework will be an unavoidable part of carrying out these developments in Victoria.
For developers and operators, this makes early planning and property due diligence essential to identifying potential land-use barriers. Planning for the energy needed to meet anticipated demand will also help address any gap between when the digital infrastructure and renewable energy supply will be ready. Early planning is therefore not only part of the application and approvals process but also critical to the success of a data centre project.
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed.
