Google and Microsoft are supporting a nationally consistent regulatory framework for Australia’s rapidly expanding data centre industry, while resisting rules that dictate exactly how operators must achieve energy and environmental targets. Their submissions to the Australian Senate inquiry into artificial intelligence and data centres place the companies broadly behind national coordination, but they also draw a line around technology-specific mandates. The inquiry, established on May 13, is examining the effectiveness of existing regulation as data centre growth accelerates, including the sector’s effects on energy, water, communities and the environment. The companies’ positions matter because AI infrastructure investment can involve long-lived commitments across power, cooling and network infrastructure. Their submissions therefore focus less on whether data centres should face stronger requirements and more on whether those requirements can accommodate different infrastructure designs, project timelines and local conditions.

Microsoft says it operates 29 data centre sites in Australia and has committed AU$25 billion through 2029 to expand its Australian AI and computing capacity. The company views the government’s existing Data Centre Expectations framework as a useful foundation for nationally consistent regulation. Google likewise wants “clear, consistent and durable national settings” for data centre investment, emphasizing that hyperscale projects involve 20- to 30-year commitments. That investment horizon creates a different regulatory consideration because power, transmission, land and cooling decisions can remain relevant throughout the development and operating life of a project. A framework that changes materially between development and operation could therefore create additional uncertainty for infrastructure designed around long-term investment decisions.

Clean Energy Rules Face a Timing Problem

Microsoft supports the principle that new large electricity loads should contribute to additional renewable generation, but it wants regulators to account for investments that developers have already made. The company argues that renewable projects developed specifically to support future data centre demand should count toward requirements even when regulations arrive after those investments begin. That issue is relevant to policymakers because renewable projects can require extended periods for approvals, transmission connections, financing and construction. Microsoft’s position is that new rules should account for clean-energy investments that developers have already made or committed to support future demand. The company therefore wants new obligations to recognize the development sequence rather than treat each regulatory change as a new starting point.

Microsoft’s Australian renewable portfolio illustrates the scale of the infrastructure commitments behind that argument. The company said its investments include 868 megawatts of contracted capacity, with 478 megawatts actively supplying the grid when it made its submission. Google has also pointed to direct renewable investment linked to data centre demand, citing its partnership with AirTrunk and European Energy on the 25-megawatt Mulwala solar farm in the Riverina. Such projects demonstrate how data centre development can connect directly with new generation rather than simply increase demand against existing grid supply. The companies want that investment recognized within a broader regulatory system instead of having clean-energy obligations operate independently from projects already moving through the development pipeline. Microsoft said, allowing operators to combine renewable generation, storage, firming and transmission investments according to the circumstances of each project.

Grid Connections Are Becoming a Data Centre Constraint

Microsoft’s submission also targets the complexity created by Australia’s state-by-state planning system. The company says developers encounter lengthy and unpredictable approvals, materially different requirements between jurisdictions and, in some cases, limited specialist expertise for assessing technologies such as advanced cooling and grid integration. Those differences can turn a project with a standardized technical design into several regulatory exercises depending on its location. For hyperscale developers, those differences can add complexity to construction sequencing, equipment procurement and decisions about future capacity. The issue becomes more consequential as AI infrastructure introduces larger electrical and thermal requirements that data centre developers must incorporate into project planning.

Microsoft recommends “dedicated, streamlined assessment pathways for major data centre projects, with statutory timeframes, clear decision criteria…and access to specialist technical expertise.” The company specifically welcomed the Investment Delivery Authority process in New South Wales as an example of a more coordinated approach. Such mechanisms are intended to give large projects a clearer route through multiple approval requirements and more predictable assessment processes. They could also give regulators more opportunity to develop specialist knowledge around high-density compute, electrical systems and advanced cooling. For developers, predictable timelines can matter alongside the approval decision because equipment orders and power commitments must be coordinated with project milestones.

Water Rules Need Local Operating Context

The companies take a similar position on water, supporting stronger stewardship while rejecting a single technical prescription for every Australian data centre. Microsoft says regulation should protect watersheds and community water resources while allowing operators to select cooling and water-management systems according to local conditions. It specifically supports “closed-loop and low-water systems,” but said governments should regulate outcomes “without mandating a single cooling architecture.” The company also argues that regulators should assess water impacts against “water availability… and competing demands,” rather than applying one national threshold regardless of local circumstances. That framework reflects Microsoft’s position that water impacts should be assessed against local water availability and competing demands.

Microsoft says its latest data centre designs include closed-loop “zero-water-for-cooling” systems and that it remains committed to becoming water positive globally by 2030. Google has adopted a related approach, saying new Australian data centres should use designs that “combine highly efficient air-cooling systems with internal closed-loop liquid-to-chip cooling.” The company also applies a water-risk framework when assessing watershed health and water scarcity during technology selection. Its ambition to replenish more water than it consumes at its sites adds another layer to that strategy. The underlying design question therefore extends beyond cooling-water consumption to how a facility manages water use under local conditions.

National Rules Must Accommodate Long Infrastructure Cycles

The broader policy challenge extends beyond renewable procurement and cooling because hyperscale infrastructure requires coordinated decisions across power, land, networks and environmental approvals. Google argues that data centre investors need regulatory settings that remain predictable across the long life of their projects. Microsoft’s position similarly ties regulatory certainty to the ability to plan infrastructure investments that can take years to complete. These timelines make transitional provisions particularly important when governments introduce new requirements after projects enter development. Without them, developers could face uncertainty over whether commitments made under one regulatory regime will remain valid when facilities reach construction or operation.

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 also argues that it already pays for 100 percent of the electricity consumed by its data centres and continues to invest in clean energy supply. The company sees some data centres as potential demand-management assets that could respond to grid conditions rather than operate solely as inflexible loads. That proposition could become more relevant as data centre operators manage different types of AI workloads with varying operating requirements. The practical value of such flexibility will depend on how regulators and electricity markets structure the mechanisms available to participating data centres.

Australia Faces a Race Between Regulation and Compute Growth

Australia’s government is developing a common framework while investment in AI infrastructure continues to accelerate. The Senate inquiry is scheduled to report on Nov. 16, 2026, giving policymakers a formal pathway to consider how regulation should address the sector’s energy and water requirements. The policy discussion now sits alongside state-level measures, including Victoria’s proposed requirements for future data centres to secure renewable energy and storage, fund their power connections and network upgrades, and address water and other local impacts. That state activity adds context to the companies’ argument that national consistency could become increasingly important as developers evaluate projects across Australian jurisdictions. It also highlights the need for any final framework to account for differences between individual electricity networks and local water conditions.

Meanwhile, the industry faces a broader infrastructure challenge than simply adding new server capacity. AI facilities can require substantial grid connections, advanced cooling systems and supporting infrastructure as operators deploy higher-density computing systems. Renewable generation may need transmission investment, storage or other firming resources before it can support a large new load reliably. Water strategies may likewise depend on climate, watershed conditions and the cooling architecture selected for a particular computing platform. A national framework that does not account for those interactions could create rules that are difficult to implement across different physical infrastructure conditions. Ultimately, Google and Microsoft are asking Australia to regulate the impact of data centres without dictating every engineering decision that produces it.