Are integrated utility precincts the answer to Victoria’s data centre problem?

A proposed mega data centre precinct at Plumpton, north-west of Melbourne, has given Victoria a glimpse of the scale of the infrastructure challenge now arriving with artificial intelligence.

The project, reported by The Age as being as large as 175 MCG fields and requiring 2.4GW of power, has already drawn criticism in State Parliament. That scrutiny is unsurprising. A facility of that scale is a major energy, water, land-use and planning decision.

The politics are complicated because Victoria also wants to capitalise on the data centre boom. Jacinta Allan’s Sustainable Data Centre Action Plan places data centres firmly within the state’s economic growth, investment and digital capability agenda. Data centres are quickly becoming the industrial backbone of the digital economy, supporting AI, cloud computing, advanced manufacturing, health, finance, defence, logistics and government services. 

The controversy around data centres often begins and ends with their consumption of power and water. By now, that problem is well understood. Under Oxford Economics’ Step Change scenario, data centres could account for 19 per cent of Victoria’s grid-supplied electricity by 2050. 

In May, state and federal energy ministers, aside from Queensland, agreed in principle that new data centres should fully offset their electricity demand through investment in new renewable generation and storage. An important policy signal, this recognises data centres as active participants in the energy system rather than passive users at the end of the network. 

But energy offsets are hardly enough to answer the broader questions Victorians are already asking. Where will the water come from? How will cooling be managed? Will our community see any benefit from this new infrastructure?

Integrated utility precincts may be the answer. Planned as part of an integrated utility hub, data centres could serve as anchor tenants for the energy, water and shared infrastructure the state already needs, and create more tangible benefits for the communities around them.

Rather than being assessed as standalone industrial developments, they could be co-located alongside renewable energy, battery storage, recycled water, wastewater treatment, shared cooling, transport links and service corridors. A large-load facility can support the business case for recycled water, provide offtake certainty for new renewable generation and storage, anchor shared cooling systems and bring land, energy, water and transport planning into the same conversation. The same precinct thinking could support the community, with benefits such as EV charging or waste heat reuse for nearby homes, industry or agriculture. It could also bring forward the shared infrastructure growing communities already need, from recycled water networks and stronger local energy systems to digital connectivity and service corridors.

We’re already seeing this start to emerge in other markets. In Denmark, surplus heat from Meta’s Odense data centre is captured and fed into the local district heating network, supplying heat to thousands of homes. In Malaysia, AirTrunk has partnered with Johor Special Water to develop recycled water infrastructure for its Johor campuses, reducing reliance on constrained municipal potable water systems. In the UAE, Open AI’s Stargate Community plan has explored operating data centre facilities as flexible loads during periods of grid stress.

Closer to home, the Melton Recycled Water Plant in Melbourne’s west is expected to supply Amazon Web Services’ soon-to-be-built data centre with recycled water for cooling from day one of operation. Large users who can’t connect directly via pipeline, Greater Western Water says, can contribute to recycled water projects elsewhere in the catchment. This is an important step in the right direction.

Victoria is right to want to capitalise on the data centre boom. The state has the demand, the policy focus, the industrial land and the digital infrastructure momentum to become a major data centre market.

Integrated utility precincts give that ambition the thing every serious infrastructure boom needs: a way to plan power, water, cooling, land use and local benefit as one connected system.