Australia's Water Infrastructure: Delivering Resilience in 2026

Australia has entered a new and more complex phase of its water security journey. After decades of drought response and emergency augmentation, 2026 marks the start of a sustained delivery challenge, driven simultaneously by aging assets, rapid population growth, climate-driven drying, and entirely new industrial water demands that did not exist a decade ago.

The Infrastructure Priority List 2026 has formally identified "Secure, Sustainable Water for Growth" as a top national priority,  a clear signal that the scale of the challenge ahead is now recognised at the highest levels of government.

$7.8B

Melbourne Water's proposed capital investment 2026–2031 for network renewal

30M

Australia's projected population by 2030, with most growth in cities

15–20%

Share of Sydney's water supply that data centres could consume by 2035

The following issues represent the most significant pressures shaping Australia's water infrastructure landscape in 2026, and the responses that will define the sector's resilience for decades to come.

The Investment Cliff and Aging Assets

Much of Australia's water and sewerage infrastructure was built in the post-war decades and is now reaching the end of its operational life simultaneously. The result is an unprecedented investment challenge across both metropolitan and regional systems; one that cannot be deferred much longer.

Metropolitan Asset Renewal

Major utilities have already flagged the scale of upgrades required. Melbourne Water's 2026–2031 price submission proposes more than $7.8 billion in capital investment to renew drinking water and wastewater networks, modernise treatment plants and improve system reliability. Similar patterns are emerging in Sydney, Brisbane and Adelaide as decades-old infrastructure approaches full replacement age across the same investment cycle.

Regional Vulnerability

Regional councils face even greater pressure with limited revenue bases, many relying on reactive maintenance rather than long-term asset planning. The National Water Grid Fund is accelerating critical upgrades (including pipelines, treatment plant improvements and drought resilience infrastructure) in communities such as Nyngan, Cobar and Kempsey. Without sustained federal support, many regional systems face a genuine risk of service interruption.

The Water-Energy Nexus and New Industrial Demand

Australia’s ambition to scale renewable energy and low‑carbon industries is reshaping long‑term infrastructure planning, including how governments and utilities assess future water supply capacity. In several regions, new industrial uses associated with the energy transition are introducing material but uneven pressures on local water systems, particularly where existing resources are already constrained.

One of the most prominent examples is the production of green hydrogen.

Green Hydrogen and Water Demand

Green hydrogen production via electrolysis requires a reliable supply of high‑purity water. While this requirement is sometimes described as water‑intensive, peer‑reviewed and industry analyses show that the absolute volumes involved are frequently overstated without context.

Independent assessments consistently distinguish between minimum chemical requirements and full project‑level demand:

• The stoichiometric minimum is approximately 9 litres of water per kilogram of hydrogen, based on the chemistry of electrolysis; and
• Typical project‑level demand (including purification losses and cooling) equates to approximately 15–25 litres per kilogram, depending on system design, cooling method, and source water quality

These ranges are well established across multiple sources:

• The Rocky Mountain Institute reports that most green hydrogen projects fall within a ~20–30 L/kg range once purification and auxiliary losses are included, and that this is comparable to (or lower than) many fossil‑based hydrogen pathways
  (RMI, 2023)
• The International Labour Organization identifies water sourcing as a first‑order planning consideration for green hydrogen, particularly in regions already experiencing water stress
  (ILO, 2024)
• Engineering reviews and project‑level analyses consistently confirm a 15–25 L/kg range once treatment inefficiencies and thermal management are accounted for
  (Green Gas Turbines, 2026)

Viewed at a national scale, these volumes are modest; however, local impacts depend heavily on regional water availability and existing demand.

The Pilbara in Western Australia is widely recognised as water‑stressed, with industry heavily reliant on groundwater systems that are already subject to intensive abstraction and regulatory scrutiny.

• Reporting by ABC News and Business News highlights longstanding concerns about groundwater depletion, with emerging industries (including green hydrogen) identified as additional pressure points
  (ABC News, 2025)
• In response, major proponents of hydrogen and green‑metal projects in the Pilbara are actively pursuing desalination‑based supply strategies to avoid drawing on existing groundwater entitlements
  (for example, the Ngarluma Water Project, developed in partnership with Traditional Owners and intended to service industrial decarbonisation projects)
  (Net Zero Economy Authority, 2025)

In Western Australia, government and industry discussions increasingly frame desalination to reduce pressure on aquifers and culturally significant water sources and provide a climate‑independent supply for hydrogen, green metals, thereby supporting industries.

While green hydrogen does not require exceptional volumes of water in absolute terms, its deployment in water‑constrained regions has material planning implications. In locations such as the Pilbara, this has led governments and proponents to prioritise new, climate‑independent infrastructure (particularly desalination) rather than reliance on existing water allocations.

This emerging water–energy nexus highlights the importance of integrating energy policy, water planning, and regional constraints as Australia’s industrial transformation continues.

AI and Data Centre Cooling

The most significant new demand for water in 2026 is AI data centres (previously viewed as an energy problem) are now recognised as major water consumers due to cooling requirements. Without a shift to recycled or circular systems, projections suggest they could account for 15–20% of Sydney's water supply by 2035.

"The Federal Government's 2026 National Interest Framework now requires data centre developers to demonstrate the use of non-potable water and to contribute financially to supporting infrastructure — aiming to prevent upward pressure on household water pricing." - Department of Industry, Science and Resources

Urbanisation and the Shift to Climate-Independent Supply

With Australia's population projected to reach 30 million by 2030, concentrated in major cities, urban water systems are being fundamentally redesigned around climate-independent supply rather than rainfall-dependent sources.

The Desalination Shift

Perth and Sydney are leading the national transition toward desalination as a stable baseline water supply. As catchment inflows become less reliable under climate change, desalination and groundwater replenishment are becoming essential long-term sources rather than emergency backstops; a structural shift with major implications for pricing, energy use and regulatory planning.

Water Sensitive Urban Design

Planning frameworks across Australia are embedding water sensitive urban design (WSUD); wetlands, stormwater harvesting and recycled water systems for non-potable use. These initiatives reduce urban heat, support ecological values and limit demand on drinking water systems, while contributing to more climate-resilient suburbs and development corridors.

The National Water Agreement and Modern Governance

The rollout of the National Water Agreement between 2024 and 2026 represents the most significant reform to water governance in nearly two decades. Two provisions are particularly significant for how water is planned and managed going forward.

Climate Adaptation Requirements

For the first time, climate change is formally integrated into all water planning. Future supply modelling, infrastructure investment and operational strategies must now account for climate variability and long-term climate projections, not rely on historical averages that no longer reflect future conditions.

First Nations Participation

The Agreement mandates the inclusion of Aboriginal and Torres Strait Islander knowledge, values and water rights in water governance frameworks. This shift moves Australia toward more equitable, culturally grounded water management, and introduces new consultation and co-design obligations for proponents and utilities.

How Peter J Ramsay & Associates Can Assist

Navigating Australia's water infrastructure challenges requires deep understanding of legislation, environmental risk and infrastructure planning. Whether you are a utility managing aging assets, a developer responding to new industrial water obligations, or a council planning for long-term resilience, our team can help.

1. EHS Legal Registers & Compliance Audits

We maintain up-to-date Environmental, Health and Safety legal registers and conduct audits to ensure operations align with current state and federal water legislation and regulatory obligations.
 

2. Regulatory & Planning Support

Clear guidance on national water frameworks, planning reforms and emerging regulatory requirements that may influence project design, operations or long-term risk exposure.
 

3. Water, Environmental & Safety Risk Advisory

We help organisations navigate climate risk, infrastructure planning, and the integration of new technologies, including WSUD, desalination, and recycled water systems.
 

4. First Nations Engagement & Advisory

Support for proponents and utilities in understanding new consultation obligations and incorporating Indigenous knowledge into water planning and governance frameworks.

Learn more about how we can assist today

Annika Taylor

Phone: 03 9690 0522

Email: annika.taylor@pjra.com.au