Cooling decides how much computing a data centre can host, how much energy it uses beyond the IT load, and how much water it consumes. In Australia, three pressures are changing cooling design at the same time: GPU densities that air alone can't handle, planning and utility scrutiny of water use, and hot summers in the places where most new capacity is being built.
New Australian AI builds are moving to closed-loop liquid cooling. NEXTDC's M4 in Melbourne is designed for direct-to-chip cooling at up to 1,000 kW per rack using non-potable recycled water. CDC's Perth campus says it will use zero water for primary cooling.
Looking for cooling contractors and equipment suppliers? See the data centre cooling supplier directory.
How Data Centre Cooling Works
Nearly all the electricity used by IT equipment ends up as heat. Cooling has three stages:
- Capture. Heat is removed from the equipment by air passing over components, or by liquid through cold plates or immersion.
- Transport. The heat is carried away from the data hall in chilled water, a coolant loop or refrigerant.
- Rejection. The heat is released outdoors through dry coolers, cooling towers, adiabatic coolers or condensers, or reused.
Efficiency is usually reported as Power Usage Effectiveness (PUE): total facility energy divided by IT energy. A PUE of 1.10, which Firmus reports for Project Southgate, means 10% of energy goes to cooling, power losses and other overheads. Water efficiency is reported as Water Usage Effectiveness (WUE): litres of water per kWh of IT energy.
Cooling Technologies
| Technology | How it works | Best suited to | Water use |
|---|---|---|---|
| Air cooling (CRAH/CRAC with containment) | Cold air is supplied to equipment inlets; hot air is contained and returned | Conventional densities | Depends on heat rejection method |
| Chilled water with dry coolers | Chillers produce chilled water; heat is rejected by air-cooled dry coolers | Most climates; low water use | Low |
| Chilled water with cooling towers | Evaporation rejects heat efficiently | Hot, dry climates where water is available | High |
| Adiabatic / hybrid coolers | Dry coolers with evaporative assist on hot days | Water-conscious designs | Low to moderate |
| Direct-to-chip liquid cooling | Coolant is piped to cold plates on processors via CDUs | GPU and AI racks | Low in closed-loop systems |
| Immersion cooling | Servers are submerged in dielectric fluid | Very high density, specialised deployments | Low |
| Rear-door heat exchangers | A water-cooled coil on the rack door | Retrofitting higher density into air-cooled halls | Low |
Chilled Water Systems
Most large Australian data centres use chilled water plants: chillers, pumps, pipework and heat rejection equipment, with redundancy so any one unit can fail without loss of cooling. The Mamre Road campus application lists 936 cooling units, which gives a sense of the scale on a gigawatt campus.
Newer designs run warmer water. Supplying chilled water at higher temperatures, and returning it hotter, lets chillers run more efficiently and increases the hours when compressors can be switched off entirely (free cooling).
Air Cooling
Air cooling is still the standard for conventional cloud and enterprise halls. Computer room air handlers (CRAH, served by chilled water) or computer room air conditioners (CRAC, with their own refrigeration) supply cool air, and hot and cold aisle containment stops the air streams mixing.
Air has limits. As rack densities rise, the volume of air needed and the fan energy to move it become impractical. ABC reports that Western Downs Digital Park is designed to be 100% air-cooled, which makes it an exception among Australia's AI-focused proposals.
Liquid Cooling
Liquid carries heat much more effectively than air, which is why it is becoming the default for GPU racks.
Direct-to-chip. Cold plates sit on the processors. A coolant distribution unit (CDU) circulates coolant in a secondary loop to the racks and exchanges heat with the facility water loop. Australian examples:
- NEXTDC M4: direct-to-chip, up to 1,000 kW racks, non-potable recycled water (NEXTDC)
- NEXTDC S7: "closed-loop, high-density liquid cooling systems" not relying on potable water, as described in the OpenAI MoU announcement (w.media)
- CDC Perth: liquid cooling with a closed-loop system and zero water consumption for primary cooling (w.media)
Immersion. Servers sit in tanks of dielectric fluid. It offers very high density but needs different server hardware, handling procedures and maintenance.
Cost. Turner & Townsend reports that liquid-cooled facilities cost 7 to 10% more on average than air-cooled facilities of similar IT capacity in the US (Turner & Townsend).
More: Liquid cooling suppliers
AI & High-Density Computing
AI changes cooling in three ways:
- Density. Heat per rack rises by an order of magnitude or more. M4's 1,000 kW design point is an extreme example of where the industry is heading.
- Hybrid halls. Even liquid-cooled racks give off some heat to air, so halls need both liquid distribution and air handling.
- Change over the building's life. GPU generations change faster than buildings, so designs need headroom for future densities and different coolant temperatures.
More: AI data centres in Australia
Water Use
How much water do Australian data centres use?
It varies widely with the cooling design. Evaporative cooling towers use a lot of water. Closed-loop and dry-cooler systems use very little. Published Australian figures:
| Source | Figure |
|---|---|
| Sydney Water (via w.media) | Data centres currently use less than 1% of Greater Sydney's water, about 3.5 billion litres a year |
| Sydney Water | Sector demand could increase Greater Sydney's total water demand by up to 20 to 25% by 2035 |
| Mamre Road campus EIS (via ACS) | About 22.4 million litres a year |
| Western Downs Digital Park (via ABC) | About 21,000 litres a day for Building One; about 25.5 million litres a year for the full campus |
| Firmus Southgate | More than 99% reduction in water use compared with standard data centres (Firmus claim) |
Policy responses:
- The federal Expectations (March 2026) ask operators to minimise water consumption and work with utilities on secure sources.
- The NSW Data Centre Policy Framework (August 2026) requires data centres to fund additional water supply and commissioned IPART to review water pricing for very large users.
- Victoria's Sustainable Data Centre Action Plan (September 2026) requires recycled or non-drinking water for water-intensive cooling in new applications, with design WUE caps of 1.0 L/kWh for potable and 1.6 L/kWh for non-potable water (Hall & Wilcox).
- Sydney Water says it prioritises recycled water for data centres and that residential customers will be no worse off (Sydney Water).
- The Water Services Association of Australia published a resource on data centres and water in Australia in December 2025.
Energy Efficiency
Cooling is the largest energy overhead outside the IT load. The main efficiency measures:
- raising supply air and water temperatures within equipment limits
- maximising free-cooling hours with economisers
- variable-speed fans and pumps
- containment to stop hot and cold air mixing
- liquid cooling, which removes heat more efficiently at high density
- heat reuse where there is a nearby heat user (rare in Australia's climate but possible for industrial users)
Efficiency and water use can pull in opposite directions. Evaporative cooling saves electricity but uses water, while dry cooling saves water but uses more electricity on hot days. Australian designs increasingly accept a small energy penalty to use less water.
Australian Climate Considerations
Most new capacity is being built where summers are hot:
- Western Sydney. Summer heat is well above coastal Sydney, and heatwave days set the design condition for heat rejection plant.
- Melbourne's west. Milder on average, but short heatwaves above 40°C.
- Perth. Long, hot, dry summers.
- Regional Queensland and the Kimberley. Heat and humidity (Kimberley) or heat and dryness (Western Downs).
- Tasmania. Home to Firmus's first Project Southgate site. A cool climate with long free-cooling periods.
Design needs to allow for heatwaves getting more frequent over a building's 20 to 30 year life.
Cooling Suppliers
Data centre cooling companies · Liquid cooling suppliers · Mechanical and engineering
Current Projects
| Project | Cooling approach (public) |
|---|---|
| NEXTDC M4 | Direct-to-chip liquid; recycled water; up to 1,000 kW racks |
| NEXTDC S7 | Closed-loop liquid cooling; no reliance on potable water |
| CDC Perth | Liquid cooling; closed loop; zero water for primary cooling |
| Macquarie IC3 Super West | Built for liquid cooling demands |
| Firmus Southgate | PUE 1.10 (reported) |
| Western Downs Digital Park | 100% air-cooled (reported) |
| Mamre Road campus | 936 cooling units; ~22.4 ML/year water |
Supplying Data Centre Cooling?
Cooling specifications are changing quickly, and buyers are looking for suppliers with liquid cooling and low-water experience. AISB helps cooling suppliers show that capability to the developers and contractors making design decisions.
Sources & Verification
- NEXTDC: M4 approval. Link
- w.media: OpenAI and NEXTDC S7; CDC Perth; Sydney Water demand. S7 · Perth · Water
- ABC News: Western Downs Digital Park. Link
- ACS Information Age: Mamre Road campus. Link
- Firmus: Southgate expansion. Link
- Turner & Townsend: Cost index 2025–2026. Link
- WSAA: Data centres and water in Australia, Dec 2025. Link
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