- NextDC's 612MW S7 campus for OpenAI in Eastern Creek, Sydney, will no longer use recycled sewage water for cooling after the developer failed to secure pipeline planning approval [1] - The facility will switch to waterless direct liquid cooling — circulating coolant around chips with fan-based heat rejection — which eliminates water use but increases electricity consumption [1][2] - NextDC acquired the 255,135-sqm site for A$353 million in October 2024; total project investment is approximately A$7 billion (~US$4.6 billion) [3] - CEO Craig Scroggie said recycled water has 'real merit' but the 'enabling infrastructure is not yet in place' in Western Sydney [1] - New South Wales is consulting on new data center PUE and water usage benchmarks, with submissions closing in May 2026
[4] NextDC has scrapped plans to cool OpenAI's planned 612MW data center in Western Sydney using recycled sewage water, switching instead to a waterless direct liquid cooling system after failing to secure planning permission for a treated wastewater pipeline, according to a Reuters report confirmed by multiple outlets [1] [2].
The facility, designated NextDC S7, is sited on a 255,135-square-meter parcel in Eastern Creek — a logistics hub in Sydney's western suburbs — that NextDC acquired for A$353 million in October 2024. The project carries an estimated total investment of approximately A$7 billion (~US$4.6 billion) and is designed to house a large-scale GPU supercluster for OpenAI's AI training and inference workloads [3].
The cooling redesign highlights a growing tension in hyperscale data center development: the trade-off between water conservation and energy efficiency. The original recycled water plan would have reduced both potable water dependence and cooling energy requirements. The replacement direct liquid cooling system eliminates water consumption entirely but requires significantly more electricity to dissipate heat via fans [1] [2].
Why the Pipeline Failed #
NextDC's original design called for treated wastewater from Sydney's sewage system to be delivered to the Eastern Creek site via a dedicated pipeline. Planning documents submitted in mid-March 2026 had highlighted the recycled water system as a key sustainability feature of the project [2].
However, discussions with local utilities ended without securing the necessary pipeline approvals. NextDC CEO Craig Scroggie acknowledged the setback but framed it as an infrastructure-readiness problem rather than a regulatory rejection.
The New Cooling Approach #
The replacement system uses direct liquid cooling (DLC), circulating a liquid coolant directly around high-performance AI chips to absorb heat. The heated coolant is then cooled via electrically powered fans rather than evaporative water towers [1] [2].
The approach eliminates any dependence on potable or recycled water — a significant consideration in Australia, the driest inhabited continent, where residential water restrictions are common during droughts. However, energy analyst Sarvaesh Mohan noted the trade-off: 'If we take the current situation at face value it will be more energy intensive' [1].
NextDC has previously deployed waterless cooling across 50MW of its existing portfolio but declined to specify the scale of implementation planned for S7 [1].
Regulatory Backdrop in New South Wales #
The cooling pivot arrives amid a broader regulatory push in New South Wales to manage data center resource consumption. The NSW government launched a six-week public consultation in March 2026 on proposed planning guidelines for data centers, with submissions open through May 8, 2026 [4].
The consultation paper proposes benchmarks for both Power Usage Effectiveness (PUE) and Water Usage Effectiveness (WUE), pointing to the EU and Singapore as reference models. It also proposes smart water meters at all data center sites and collaborative forecasting between industry and government on water demand [4].
For NextDC, the shift to waterless cooling may simplify compliance with any future WUE requirements but could complicate adherence to PUE thresholds. The NSW consultation paper has flagged a potential PUE limit of 1.3 — a target that becomes harder to meet when cooling systems rely entirely on electricity rather than evaporative processes [4].
Project Timeline and Scale #
The OpenAI partnership was announced on December 5, 2025. NextDC S7 is designed for up to 550MW of IT load and is expected to deliver Phase 1 capacity by late 2027, with full buildout phased over several years [3].
The campus is designed to Tier IV equivalent sovereign infrastructure standards, with 100% renewable energy sourced via long-term power purchase agreements. It will comply with Australia's Security of Critical Infrastructure (SOCI) framework [3].
NextDC (ASX: NXT) is the largest listed data center developer and operator in Australia, with a market capitalization of approximately A$10.5 billion. The company reported revenue of A$427 million in fiscal year 2025, up 5.7% year-over-year [5].
Companies mentioned #
Further sources #
[1] Reuters exclusive via Yahoo Finance — OpenAI's Australian data centre drops wat… ↗ [2] EconoTimes — OpenAI Australia Data Center Switches Cooling Strategy After Recyc… ↗
[3] DC Pulse — NEXTDC S7/OpenAI AI Campus project profile ↗ [4] Smart Water Magazine — Australia sets the rules: what the new data centre polic… ↗
[5] Stock Analysis — NEXTDC Limited (ASX: NXT) financials and overview ↗ The stories that matter, in one email. Free — unsubscribe anytime.