The race to build AI infrastructure across the Indo-Pacific is moving faster than the water and energy systems it depends on. Research commissioned by AWP from the Alliance for Global Water Adaptation (AGWA) looks at what’s at stake and how governments can get ahead of it.
Through a year-long series of research, conversations and roundtables with decision-makers and investors in the data centre space, AWP and AWGA have published some resources on the state of the sector across the Indo-Pacific.
A single large AI data centre can use up to 19 million litres of water a day at peak. However, global spending to build, upgrade and run data centres is projected to reach US$2-3 trillion over the next five years, with a further US$4 trillion expected to go on the chips and hardware inside them. Asia-Pacific is one of the fastest-growing markets, with an estimated US$800 billion to US$1 trillion going into digital infrastructure in the next few years.
Where the water goes
Data centres use water directly for cooling, and indirectly through the electricity they draw, particularly from coal, gas, nuclear and hydro plants.
Many of the region’s fastest-growing hubs are in places already short of water. Jakarta, Johor, Delhi, Chennai and Bengaluru are all large cities with stretched supplies, and their grids still lean heavily on coal and gas.
The pressure is already showing. Malaysia has brought in stronger regulations and incentives to cut data centre water use. In Chennai and Bengaluru, operators are facing long delays in getting “Consent to Establish” permits, as residents living with rolling water shortages push back against the water demands of hyperscale facilities.
That’s a business problem as much as a community one. A data centre that relies on water for cooling is exposed the moment supply is cut. Even if an operator secures its own water, shortages in the surrounding community can cost it reputation and social licence, and make the next project harder to approve. If taps run dry, so does business.
Power and water are one problem
Data centres also need enormous amounts of power, which has a second, indirect impact on water resources. Coal, nuclear, hydropower and other renewable energy sources are themselves dependent on reliable water supplies for safe generation. This puts data centres in direct competition with household electrification, on grids already stretched by demand from EVs, air conditioning and industrial growth.
AGWA’s research points to demand-response protocols and integrated water-energy grid planning as ways to let digital infrastructure grow without pushing up household power bills or destabilising the grid.
On the water side, the research sets out policy options including zero-water cooling mandates and the use of recycled water. Measures like these could help Australia and the Pacific attract high-tech investment and stay climate-resilient, rather than being forced to react.
Who holds the water?
The research also puts water governance and climate sovereignty at the centre. First Nations Australians hold deep knowledge of water governance, and as hyperscale data centres and renewable grids expand across the country, Community Benefit Agreements offer one way to protect water rights and deliver direct economic returns to Traditional Owners.
Pacific Island countries face their own severe climate risks and tight freshwater limits. AGWA argues that digital expansion there should not draw scarce water and energy away from local communities, and should instead help bring corporate investment into resilient municipal infrastructure.
The question is who will bear the cost when the next wave of data centres gets built, and whether governments, utilities and tech operators can plan for it in time.
Read and listen
Read the AGWA briefing paper.
AGWA Senior Policy Advisor Josh Weinberg joins the Aquaholics hosts on episode 2, AI – Are We Really Going to Put Data Centres in Space? Listen on Spotify, Apple Podcasts or Amazon Music.
This series is a collaboration between the Australian Water Partnership and the Alliance for Global Water Adaptation.