Community concerns about their construction have become so widespread that one Sydney council has called for a moratorium on data centre approvals until consultation guidelines are changed.
Local councillors, academics and engineers appeared before the NSW government inquiry into data centres on Friday, which is probing whether the state is prepared to handle their environmental and economic impacts.
More than 270 data centres have been established in Australia, including 90 in NSW, as technology companies expand facilities to meet demand for artificial intelligence.
But Sydney residents were already expressing concerns about data centres in their areas, Lane Cove Council Deputy Mayor Rochelle Flood said.
The centres produced air pollution from diesel generators, she said, caused disruption during construction, and their developers were not required to consult meaningfully with local authorities.
"We would like to see a moratorium on new data centre approvals until such time as the core issues are addressed and we have a more sustainable industry that does give local communities a voice in the planning process," she said.
Residents had reported more blackouts and brownouts since a data centre was built in their suburb, Ms Flood said, and another four were proposed for the area.
"In Lane Cove West, we are seeing a cluster of data centres emerging in a small business park that's very close to homes, the local school, childcare centres, the community nursery, significant bushland and our parks," she said.
"The problem is that these proposals are still being assessed one by one, rather than looking at the cumulative impacts."
Communities around data centres had become suspicious of the developments, City of Sydney Deputy Lord Mayor Jess Miller said, due to a lack of consultation and co-ordination.
Opinions could change, she said, if developers consulted more extensively and invested in renewable energy to fuel the projects.
"The impression they have, based on what they can see, is that they're ugly, intrusive and parasitic," she said.
"If designed well, utilising innovation, design and engineering, they may well offer an opportunity to contribute meaningfully to our communities becoming more energy and water-resilient."
Technology firms should be encouraged to establish data centres in regional areas to address concerns, Australian Academy of Technological Sciences and Engineering deputy chief executive Peter Derbyshire said, alongside renewable energy projects that could provide the power they needed.
Planning issues could be addressed by creating designated zones for data centres, WinDC chief executive officer Andrew Sjoquist said, just as governments had done for renewable energy projects.
"Perhaps there should be a concept of something like a (zone) where the data centres are more welcomed and perhaps more streamlined in through the approval process," Mr Sjoquist said.
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