Amazon announced a partnership with Greater Western Water on Thursday to supply recycled water to a data centre the company is building outside Melbourne.
The facility would be the first in Victoria to use treated water and comes after warnings from some providers that data centres in Sydney could use up to 250 megalitres of water a day by 2035, threatening drinking supplies.
It also comes one year after Amazon announced it would invest $20 billion to expand its data centre infrastructure in Australia, and as two government inquiries probe their potential impacts.
Work connecting Amazon's latest development to a recycled water plant in Melton was due to begin within days, Greater Western Water managing director Cameron FitzGerald said, with plans to launch in late 2027 or early 2028.
Using recycled water would make data centres more sustainable and the company anticipated more facilities would follow, he said.
"We want to position ourselves as a provider that meets the needs of a growing city and data centres are a part of that," he said.
"We're really proud that it's the first one in Victoria — it's showing the way for others to be able to take advantage of recycled water when it's available."
The development would be the first local Amazon data centre to use recycled water, Amazon Web Services energy policy head Matt O'Rourke said, but it would seek more opportunities to meet its target to be water-positive by 2030.
"Our preference is to always use recycled water where that's available," he told AAP.
"Globally, AWS has 24 data centres today operating on recycled water and plans to expand that number to 120."
Data centres, which are used to process digital resources including AI, use significant amounts of water to cool their servers.
Some are more efficient than others, Mr O'Rourke said, and Amazon's Melbourne data centres used 158 megalitres of water in 2025, which was equivalent to 63 swimming pools.
"Although there's lots of reporting around the water use of data centres, there's also a lot of misunderstanding there as well," he said.
Sydney Water recently warned that data centres could use as much as 250 megalitres a day in the city by 2035, and one already ranked among its top 20 users.
Australia hosts 1.5 gigawatts of data centre capacity, according to BloombergNEF, and is the world's eighth-largest market for the developments.
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