Sydney Water also repeated its warning data centres could use up to one quarter of the city's drinking water within a decade, and infrastructure investment would need to rise to meet demand.
The warnings came on Friday at the third hearing of the NSW government's data centre inquiry, which heard from organisations including energy providers, local councils and business groups.
Australia has become the second-largest destination for data centre investments worldwide as tech companies attempt to meet demand for AI tools.
But questions remain over their electricity and water consumption, Carbon Zero Initiative strategy lead Alexander Hoysted said, and energy providers have had little chance to assess their impact.
"It's a little bit like a sneeze - it starts slowly and then all of a sudden these issues burst onto the scene very quickly," he said.
Despite claims data centres' water consumption had been exaggerated, Sydney Water managing director Darren Cleary repeated the organisation's forecast that data centres could use up to 25 per cent of the city's drinkable water by 2035.
"Our forecasts do reflect applications that are coming in that are planning to go ahead and there's clearly uncertainty when we get towards that 10-year time frame," he said.
"We have a large new industry developing in west or in greater Sydney that will add a significant new demand to our system."
Data centres' commitments to renewable energy should also be examined closely, Greenpeace Australia Pacific campaigner Solaye Snider said, and a moratorium should be placed on approvals until the industry has greater certainty.
"We need to pause, especially on the largest and most energy-intensive proposals right now, because we simply don't have enough renewable energy readily available," she said.
"We also want to scrutinise some of the claims that are being made by data centre operators and the data centre lobby around this."
The Lane Cove Responsible Planning Group also called for a moratorium, with member Paul Trainor telling the inquiry planning regulations were inadequate.
Six data centres were planned for the Sydney suburb, he said, including one within 20 metres of homes and 160m of a school, despite concerns about noise and air pollution.
"If data centres are truly critical infrastructure, they must be planned to a far higher standard and not cluster beside homes, beside schools, beside recreation areas without enforceable statewide planning rules and cumulative impact assessments," he said.
New regulations should address concerns about their water use, housing and cost recovery, Urban Development Institute of Australia chief executive Stuart Ayres said, but also give developers greater certainty.
"The issue of this inquiry is not whether NSW should accommodate data centres - it should," he said.
"The question is whether they are planned, serviced and approved within a transparent, disciplined planning framework."
