Corrs High Vis: Episode 62 - Power, planning & data centres - inside NSW’s new guidelines

Bree Miechel, Partner, Corrs Chambers Westgarth

Louise Camenzuli, Partner and Head of Environment and Planning

Bree: We’d like to begin this podcast by acknowledging the traditional custodians of the various lands on which we stand today.

We’re joining you from the traditional lands of the Gadigal people of the Eora Nation, and we pay our respects to their elders past and present and recognise that sovereignty has never been ceded.

Welcome back to another episode of the Corrs High Vis podcast. I’m Bree Miechel, a partner in Corrs Chambers Westgarth’s Project Practice, and I’m joined by my colleague, Dr Louise Camenzuli, who heads our environment and planning practice. Today we are going to discuss the Data Centre Policy Framework that the NSW Government released last week.

Louise: Thanks, Bree. 

Data centres are bringing billions of dollars of potential investment into New South Wales and Australia, supporting jobs and infrastructure, and positioning the state to capture a significant share of the global AI and digital economy. But that opportunity comes with very real demands on land, energy, water, and infrastructure, and understandably, questions from communities about who bears those costs and how those impacts are managed.

Bree: For me, this is also personal. I live in Lane Cove [a Sydney suburb] and like a lot of people in communities across the state and Sydney, we’re watching these developments unfold close to home. So I come at this both as a practitioner advising on these projects and as someone who lives in a community that cares about how they’re delivered.

I know, Louise, you discussed some of these issues in our videocast, Navigating ESG Risk in Australia’s Data Centre Boom back in June. Since then, we’ve had announcement at the federal and state level on how data centres, and the infrastructure that supports them, can be delivered in a way that captures the economic opportunity while also protecting the interests of the people of New South Wales and Australia, addressing community concerns and supporting the energy transition.

Louise: Yes, that’s right, Bree. The recent wave of government announcements are an important response to the challenge, putting in place a framework designed to ensure that the benefits of this investment in data centres are realised while the costs and impacts are appropriately managed and where possible borne by the projects driving that demand.

Bree: The reason this topic is so exciting right now is the momentum we’ve seen in recent months and the coherence of what the New South Wales Government is trying to achieve. When you look at the [NSW] data centre policy framework and the new data centre guidelines and then you look at what’s happening, for example, with the Tomago aluminium smelter bailout and the government’s push to bring more wind and firming capacity online to stabilise the grid, it’s all actually pointing in the same direction. They’re not isolated policy moves. They’re all seeking to achieve one and the same objective, a stable and orderly transition of our energy system.

Louise: Absolutely. And the new guidelines offer fast track planning approvals where a data centre commits to supporting new wind generation and firming capacity. So you’ve got a policy architecture that says, if you’re going to bring a very large new load onto the grid, you need to be a part of the solution and, if you are, well we’ll streamline your pathway to delivery. That’s an elegant alignment of interests.

Bree: And New South Wales isn’t operating in a vacuum. There’s real competition between states, Queensland, Victoria, South Australia, all vying to attract data centre investment. The jurisdictions that get the regulatory setting rights, that offer certainty to investors while genuinely addressing community and grid impacts will win that investment. And the stakes are high and New South Wales has moved decisively and in alignment with the Federal Government.

Louise: Yes, the New South Wales Government is proposing changes that reach into electricity connection arrangements, network cost allocation, planning approvals, environmental regulation, water infrastructure and the way developers manage their obligations to the grid and the broader community. So, as you say Bree, it’s all integrated.

Bree: And today we’re going to step through what the recent changes under the New South Wales framework and guidelines mean in practice. Louise, in particular, will be looking at planning and environmental regulation, including water and emissions from on-site generation, and I’ll focus more on the electricity and grid implications.

So to set the scene, the New South Wales Government released two companion documents on 17 August 2026: a consultation paper on reforming electricity network connection and cost‑recovery arrangements for data centres, and the NSW Data Centre Guidelines that set the policy principles those facilities are expected to meet. 

The consultation paper does not itself change the law; instead, it outlines 10 reforms the Government intends to implement by regulation and targeted National Electricity Rules derogations, subject to the passage of the Electricity Infrastructure Investment Amendment Bill 2026. If it is passed, that Bill would expand powers under the Electricity Infrastructure Investment Act 2020 (NSW) — including enabling new regulation‑making to coordinate large loads and to derogate from the NEL/NER for NSW — and would allow the Minister to declare a new ‘large‑load’ access scheme.

From a legal perspective, it’s really important because we’re potentially moving from a relatively conventional connection process to a much more prescriptive regulatory framework that may prohibit access for large loads to the network.

Louise: And the New South Wales data centre guidelines then add another layer. The guidelines establish six overarching principles, including world-class environmental standards, no net costs to consumers, funding additional energy and water supply, and enhancing community infrastructure. 

For developers, those principles aren’t simply aspirational. They are intended to shape the planning and approval pathway and importantly, the conditions under which projects may receive streamlined treatment.

So projects that demonstrate alignment with the guidelines may benefit from a more streamlined planning process, including provision of the Secretary’s Environmental Assessment Requirements, or SEARS, within two months, a 75-day development application assessment process and dedicated pre and post concierge services. 

So from a legal perspective, that creates an important question. What exactly does a developer need to commit to in order to obtain that streamlined pathway and which of those commitments ultimately become enforceable planning or environmental obligations?

Bree: I’m also curious how this process compares to the current approvals pathway in New South Wales. For example, the benefits that projects that were successful in obtaining IDA endorsement enjoy.

Louise: Yes, that’s a good question. 

So projects that have obtained endorsement from the Investment Delivery Authority benefit from coordinated government support. That includes a dedicated case manager, assistance navigating regulatory requirements across agencies and priority access to key government stakeholders. Whereas the new data centre guidelines streamline pathway is quite different. It offers more prescriptive timing commitments. The Secretary’s environmental assessment requirements, as I said, needs to be issued within two months. You then have that 75-day development application assessment period but in exchange, for that timing certainty, you are required to ensure that there is a demonstrable compliance with the six principles, including the electricity, environmental, water and community infrastructure requirements.

So proponents can have a greater certainty on timing, but they must accept more onerous upfront commitments.

Bree: And just taking a step back and looking at the electricity connections point, the scale of infrastructure needed to support data centres, it truly is extraordinary.

As of July 2026, data centres were seeking around 28 gigawatts of connection capacity in New South Wales with around 13 gigawatts already in advanced discussions with NSPs, the network service providers. And for context, the current average daily electricity demand across the New South Wales grid is only around 7.5 to 10 gigawatts and more than 90% of the proposed data centre pipeline is concentrated in the Sydney/Newcastle/Wollongong corridor.

Louise: Yes, and there is a question as to whether the surrounding infrastructure, electricity as well as water, transport, community infrastructure and environmental capacity is capable of supporting that development.

Many planning instruments already require applicants to demonstrate that there is adequate enabling infrastructure in place to service the data centre before development consent can be granted.

Bree: And regarding the network capacity, this is where the electricity reforms become particularly significant. The consultation paper we’re discussing today that was released on 17 August proposes a series of measures that would materially change the economics and legal risk allocation associated with connecting a large data centre.

These include: an entry bond of $30,000 per megawatt, a major network upgrade fee of $200,000 per megawatt in the Sydney/Newcastle/Wollongong region, and a $100,000 per megawatt elsewhere, take or pay arrangements potentially involving guaranteed minimum use of system charges for 10 years, mandatory power purchase arrangements with firming and demand flexibility requirements.

The proposed framework applies to connections of 15 megawatts rated capacity or greater, which captures most hyperscale and major co-location facilities.

Louise: Yes, and from a project development perspective, that changes the diligence exercise. I mean, historically, a developer might have treated the connection process as one work stream within a much larger development program. Now, the connection position could become a fundamental determinant of whether the project is commercially viable and whether the development should proceed at all.

Bree: Absolutely. The legal issue is not just the quantum of the fee. It is when the liability arises, whether it’s refundable, what triggers it, who bears stranded costs, and how those obligations interact with the developer’s broader financing and construction commitments. And it matters because data centre development is typically staged. You might have a site capable of supporting 500 megawatts or more, but the developer may initially require only 100 megawatts.

The legal and commercial question becomes how much network capacity you’re committing to and how much of the associated cost are you underwriting before you have a corresponding customer or construction commitment.

Louise: And that is a direct relationship with securing your planning approvals. In general, a developer cannot obtain planning approval for a development without first demonstrating that the electricity connection and other essential public utility infrastructure is available, or that adequate arrangements have been made to make it available when required. This means that uncertainty around the timing and availability of the electricity connection is not a risk that can be deferred to post approval. It is a threshold issue that must be resolved in order to obtain development consent in the first place. 

So that creates an important sequencing issue between land acquisition, planning approval, connection rights, construction commitments and customer commitments.

Bree: Exactly. The old model of securing a connection early and then progressing the project may become considerably more expensive.

The proposed entry bond and cost recovery mechanisms are clearly intended to discourage speculative connection applications. It’s effectively a regulatory response to what the Government regards as phantom demand in the connection pipeline.

For developers, the legal consequence is that a connection application becomes a much more significant financial commitment.

The second major electricity issue is power procurement, and the proposed framework contemplates mandatory green energy procurement and firming arrangements.

For renewable energy developers, this could be highly significant because a data centre represents a potentially long-term, credit worthy off-take counterparty. The proposed PPA frameworks includes a minimum 40% wind generation component, minimum 10-year agreement durations and requirements that relevant projects have not yet reached financial investment decision. 

That last requirement is particularly important. The policy is not simply allowing data centres to contract existing renewable generation. It’s intended to create additional generation capacity.

Louise: And that is where the legal drafting of the PPA becomes important. If a data centre is effectively using its power procurement arrangements to demonstrate regulatory compliance, the PPA is no longer just an energy procurement contract. It becomes a fundamental part of the project’s regulatory compliance architecture. That raises questions around minimum contracted quantities, commissioning dates, availability, force majeure, change in law, replacement projects and termination rights.

Bree: And this is where the same framework looks very different depending on which side of the transaction you sit on. For the data centre, the mandatory PPA requirement is a regulatory compliance obligation. It creates contractual risk, long-term financial commitment and exposure to counterparty performance. But for generation and best developers, the picture is the opposite. What represents a regulatory obligation for the data centre represents a commercial opportunity for the generator. The mandatory procurement framework effectively creates a pipeline of creditworthy long-term off takers that materially improves project bankability and financing prospects.

Louise: And it’s worth stepping back to see the broader policy design here. I mean, this isn’t just a framework for managing data centre load on the grid. The Government is deliberately using the data centre regulatory framework as a mechanism to further the energy transition. The logic is, if you’re going to have massive new electricity demand entering the system, turn that challenge into a solution by requiring it to drive investment in a new renewable generation and storage.

Bree: Exactly. And you can see that intent running through the specific design choices. The mandatory PPA requirements, the 40% wind generation minimum and critically the requirements that contracted projects have not yet reached financial investment decision. Those aren’t arbitrary thresholds. They’re all designed to catalyse additional clean energy investment rather than simply allowing data centres to contract generation that was already going to be built.

Louise: Yes, so the regulatory framework is serving a dual purpose, managing the grid impact of data centres while simultaneously accelerating the build out of the generation fleet New South Wales needs to meet its broader decarbonisation targets.

Bree: And the policy intervention comes at a critical time for generation and best developers. The economic environment has been extremely challenging in recent years. Supply chain disruptions, construction cost escalation, labour constraints, community opposition, planning delays, connection queue congestion and, critically, uncertain offtake. Many projects have struggled to reach FID precisely because they cannot secure the long-term revenue contracts that lenders require.

Louise: Yes, so this mandatory data centre PPA framework potentially addresses that gap directly by creating a pool of creditworthy counterparties who are required by regulation to contract new generation. That’s a fundamentally different proposition from hoping the market delivers voluntary offtake.

A 10-year take or pay arrangement with a strong data centre counterparty can materially improve the financing for a renewable project. 

For a wind or solar developer, the question becomes whether the proposed framework creates sufficient revenue certainty to support financial close.

For a data centre developer, however, the same arrangement creates a potentially significant long-term contractual obligation. 

So the policy may shift risk from the electricity system onto individual project counterparties, but that risk then has to be priced and allocated through the project documents. That is a theme we’re going to come back to throughout this discussion.

The Government is effectively asking developers to internalise more of the infrastructure and environmental costs associated with their projects.

The legal question then is how those obligations are documented, enforced and allocated between the developer, infrastructure providers, customers, lenders and investors.

Moving on to demand flexibility.

One aspect of the guidelines that is particularly interesting from an environmental and planning perspective is the proposed demand flexibility requirement.

To benefit from the streamlined planning pathway, a data centre must demonstrate the ability to reduce grid supplied electricity demand by 25% of forecast average load for up to two hours.

Bree: And importantly, diesel generators cannot be used to satisfy that demand flexibility obligation. That’s a significant point.

Louise: Yes, because diesel generation is often part of the resilience architecture of a data centre. 

From a planning and environmental regulatory perspective, however, backup generation is not necessarily a regulatory free pass simply because it is intended for emergency use. The development needs to consider the planning approval framework, environmental licensing requirements, air emissions, noise, fuel storage and handling, spill risks and the potential consequences of operating generators. And if the operating model involves materially more frequent use of diesel generation, that can become a much more significant environmental issue.

Bree: Which is why the proposed framework is commercially interesting. The developer needs resilience, but it cannot simply rely on diesel to satisfy the grid flexibility obligation. It creates a stronger commercial case for BES, demand response and other forms of flexible load management.

Louise: And it also means that the planning and environmental analysis needs to be done at the same time as the power strategy.

So for a larger data centre, the choice between BES, load shifting, gas or diesel generation and other backup or firming technologies can have consequences across planning, environmental approvals, air quality noise, hazardous materials and operational compliance matters.

Bree: It’s a good example of why the new framework needs to be approached as an integrated project development issue rather than as separate legal work streams.

Louise: Yes and another area that I think developers need to focus on much earlier is water. The guidelines expressly contemplate data centre proponents contributing to the construction of infrastructure for additional energy and water supply. That is significant because water availability and infrastructure capacity can become a development constraint in their own right.

For developers the question are not simply does the site have access to water, we need to consider the water and wastewater infrastructure, connection capacity, discharge arrangements and the allocation of responsibility for augmentation.

Bree: And there’s an interesting parallel with electricity. Just as the Government is seeking to ensure that large new electricity loads don’t impose their network costs on other consumers, the guidelines appear to adopt a similar principle in relation to water infrastructure.

Louise: Exactly. So from a legal perspective, developers need to understand what infrastructure is available, what augmentation is required, who is responsible for delivering it, who pays for it, and whether those obligations become conditions of development content or contractual obligations with infrastructure providers or both. That is particularly important for staged developments.

A data centre campus may have a substantial ultimate water requirement, but the infrastructure may need to be committed well before the ultimate demand materialises. Again, that creates a question of stranded infrastructure risk. 

And Bree, there is another environmental issue worth watching closely. 

The New South Wales Government has indicated that it will review the Protection of the Environment Operations Act framework to ensure that the licensing regime for scheduled activities is fit for purpose for data centres. That is potentially very significant. Data centres are generally perceived as clean technology infrastructure, but a large facility can have a substantial environmental footprint. Think about diesel backup generation, fuel storage, emissions and noise impacts.

Bree: Particularly where you have a very large on-site generation capacity.

Louise: Exactly. A developer therefore needs to assess, not just whether generators can be installed, but whether they require an environment protection license and there is an important commercial point here. If the environmental regulatory framework changes during the development or operational life of the project, the developer may face additional capital expenditure or operational restrictions to ensure compliance. That is a classic change in law and regulatory risk allocation issue.

Bree: Which needs to be reflected in the project contracts, particularly EPC arrangements, O&M contracts, energy supply arrangements and customer agreements.

Louise: Yes.

Bree: And in terms of what the other states are doing, as we’ve discussed, New South Wales isn’t operating in isolation.

South Australia has taken a particularly strong approach. Its technical regulator guidelines requires data centres at 100 megawatts or above to bear network augmentation costs and comply with directions to vary their load by up to 100% within reasonable timeframes where there are certain grid conditions.

Western Australia has a bill before Parliament proposing $100,000 per megawatt capital charge for new or expanded transmission connections at 10 megawatts or above.

At the other end of the spectrum, Queensland and Victoria have taken a different approach, proposing fast-tracked approval processes with lower regulation for data centres.

Louise: Yes, and so for developers, that means regulatory comparison is becoming part of site selection. The cheapest electricity connection isn’t necessarily the cheapest development. You need to compare the entire regulatory pathway, planning, environment approvals, water, network costs, connection timing, operational obligations and the certainty around these requirements.

Bree: It certainly creates a very interesting competition between jurisdictions.

If New South Wales imposes significant network and environmental obligations while another state offers a more permissive framework, there’s a risk that investment moves. 

But from a developer’s perspective, the question shouldn’t simply be, where is regulation easiest? It should be, where can I secure a legally robust, financeable and deliverable project?

Taking a step back and looking at the national picture, it’s also why there is an emerging national framework and why that matters. The Energy and Climate Change Ministerial Council has been working towards a national approach to large load connections, and the Australian Government has also submitted a rule change request to the AMC concerning cost recovery. So developers are facing an interesting legal environment. We have national electricity market rules, but New South Wales is proposing jurisdiction specific reforms. It raises questions about the interaction between state legislation, the national electricity law and national electricity rules.

Louise: And there is a similar issue on the environmental side.

A data centre developer may be dealing with Commonwealth environmental requirements as well as New South Wales planning and environmental regulation.

So the regulatory architecture is becoming multi-layered.

Bree: Which means developers should be thinking about regulatory change as a project risk from the outset rather than treating it as something to be addressed after the project has been designed.

Louise: Let’s turn to Tomago because it provides an interesting case study.

Bree: There is certainly a system planning distinction.

Tomago is an existing predictable load integrated into the electricity system.

A new data centre represents incremental demand that needs new network and generation capacity. But that doesn’t eliminate the broader policy question.

If government is prepared to support an existing 950 megawatt industrial load while requiring a new data centre to bear substantial network and energy procurement costs, developers are going to ask whether the regulatory framework is treating competing forms of large load consistently.

Louise: And that is ultimately a question of regulatory design rather than simply economics.

The Government appears to be trying to balance several competing objectives. Energy security, industrial policy, consumer protection, regional development, environmental performance and attracting new investment.

For developers, the important point is that those objectives are increasingly being translated into legally relevant conditions and obligations.

Bree: So Louise, if you’re advising a data centre developer today, what would you be telling them?

Louise: I would say don’t treat planning, environmental and infrastructure approvals as sequential work streams.

Start with an integrated regulatory map.

Before committing significant capital, understand the planning pathway in your relevant jurisdiction and the likely consent conditions.

Electricity connection availability and timing, water supply and wastewater capacity, environmental licensing requirements, on-site generation and emissions implications, community infrastructure obligations and the regulatory commitments that may be necessary to obtain streamlined approval, and critically, identify which of those obligations are capable of changing during the development or operational life of the project.

Bree: From the power side, I’d add four things.

First, don’t assume that a connection reservation is the same thing as a bankable connection.

Second, model the full cost of network access, including proposed augmentation and take-or-pay arrangements.

Third, secure your power procurement strategy early, particularly where a PPA affirming arrangement or storage asset is necessary to demonstrate compliance.

And fourth, consider location very carefully.

The proposed differential in network fees creates a genuine locational signal. Regional locations, including areas associated with renewable energy zones, may become significantly more attractive.

Louise: And from a transaction perspective, all of this needs to flow through into the contracts.

If a data centre is being developed with a hyperscaler or colocation customer, the parties need to decide who bears network augmentation costs, delays in connection, changes in regulatory requirements, environmental compliance costs, water infrastructure costs, changes to emissions requirements, and the risk that a regulatory commitment can no longer be satisfied in the way originally contemplated.

Bree: The regulatory framework is effectively creating a new set of project risks.

The sophisticated developers will be looking to allocate those risks expressly rather than leaving them sitting between the planning approval, connection agreement of PPA and customer contract.

Louise: So to wrap up, what we are seeing in New South Wales is much more than a policy response to the growth of data centres.

It is an attempt to establish a regulatory framework for a new class of very large infrastructure projects and that framework reaches across planning and environmental regulation, water, electricity and infrastructure costs.

Bree: And on the electricity side, the direction of travel is clear. Large new loads are increasingly expected to contribute to the cost of the network they require, procure renewable generation and firming, and demonstrate their ability to respond to system stress.

Louise: And on the environmental front, developers should expect increasing scrutiny of the physical impacts of data centre operations, particularly water use, backup generation, emissions, pollution risks and the infrastructure required to support very large facilities.

Bree: The key message for developers and investors is therefore to engage early.

The regulatory framework is still developing with submissions on the consultation paper closing on 14 September 2026 and regulations expected by the end of the year.

Louise: Yes, and waiting for the final regulations before addressing these issues may be too late.

The projects that are likely to be best positioned are those that can demonstrate from the outset that their electricity, planning, environmental and infrastructure strategies are integrated.

Bree: And ultimately, that they can present themselves not simply as very large new loads, but as projects that can be delivered without imposing disproportionate costs or risks on the electricity system, the environment or the community.

Louise: And we’ll be watching closely as the New South Wales framework develops.