Thailand rethinks data centre incentives over power and water

Thailand is preparing to overhaul the rules and investment incentives governing data centres, with the government seeking to ensure that future projects deliver measurable benefits to the Thai economy while managing their heavy demands on electricity and water.

Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas said the policy review was intended to keep pace with rapidly evolving technology and ensure that investment in the sector creates genuine economic value for Thailand.

The government and the Board of Investment (BOI) have already begun reassessing how data centre projects are screened, with greater attention being paid to benefits to Thailand, energy and water efficiency, and environmental impacts.

Until now, government policy has largely focused on attracting data centre investment through BOI incentives. Rapid growth in the industry, however, has prompted a broader reassessment of that approach, with investment value alone no longer expected to determine whether a project deserves government support.

Incentives to be tied more closely to benefits for Thailand

Under the revised approach, authorities will look more closely at what Thailand receives in return for granting incentives. A key consideration will be how individual projects benefit Thai people and contribute to the domestic economy.

The assessment will therefore go beyond the amount of capital brought into the country. Authorities will also consider whether projects strengthen Thailand's digital infrastructure, generate wider economic activity and create meaningful domestic benefits.

“This review is a complete overhaul, with the value to the country's economic system as the starting point. We must consider comprehensively how the benefits will accrue to Thai people, while also taking environmental issues involving water and electricity, as well as the various incentives, into account,” Ekniti said.

Power and water use face closer scrutiny

Resource consumption is another central concern because large data centres require substantial amounts of electricity and can use significant volumes of water for cooling. Electronic waste generated by their operations also needs to be properly managed.

The new framework is therefore expected to place clearer requirements on operators to account for their electricity and water consumption, with the aim of preventing rapid digital industry expansion from placing an excessive long-term burden on Thailand's energy and natural resources.

As AI and data centre activity expands, the government faces the challenge of accommodating rising infrastructure demand without compromising energy and resource security. The policy review is intended to strike a balance between attracting investment and ensuring that the country's electricity and water systems can support it sustainably.

Government seeks oversight beyond BOI-backed projects

Ekniti acknowledged that Thailand does not yet have a fully unified system for overseeing the entire data centre industry.

Some operators can establish businesses in Thailand without applying for BOI investment promotion. This limits the government's ability to manage the sector as a whole, particularly in areas such as resource consumption and the effects of large projects on the power system.

The government therefore wants a regulatory mechanism that extends across the industry, covering both projects receiving BOI privileges and data centres established through other investment channels.

The Cabinet on August 5 approved a draft Prime Minister's Office regulation establishing a national policy mechanism for the data centre sector. It is intended to coordinate policies, standards and guidelines used by government agencies when approving, licensing or promoting data centre projects, or providing services to data centre operators.

The broader approach is expected to involve agencies responsible for investment, energy and natural resources, including the BOI, the Ministry of Energy and the Ministry of Natural Resources and Environment.

The change represents a shift away from treating data centres purely as investment projects towards viewing them as strategic infrastructure whose development intersects with the economy, technology, energy security and environmental management.

AI boom brings tighter data centre controls worldwide

Thailand's reassessment comes amid a broader international shift in the treatment of data centres. Governments, regulators and cities in several countries have introduced or proposed restrictions as the rapid expansion of AI drives concerns over electricity costs, water consumption, land availability and pressure on local infrastructure and communities.

Australia prepares national rules for large data centres

Australia plans to establish an Office of AI to coordinate AI policy and standards. The planned framework will include requirements governing where large data centres can be built and how they use electricity and water.

The Australian government has indicated that legislation is expected to be introduced early next year. Australia currently has no dedicated AI law and instead relies on privacy and consumer protection legislation alongside a voluntary AI ethics framework.

European cities tighten controls on power and land

Amsterdam imposed a one-year moratorium on new data centre developments in 2019. In April 2025, the Dutch capital went further by barring new facilities or expansions within the municipality until at least 2030.

At national level, the Netherlands introduced restrictions on hyperscale data centres in 2022, limiting them to two designated areas. Microsoft nevertheless secured approval in January 2026 for an Amsterdam project divided into three separate towers, each falling below the relevant size threshold.

Around Dublin, Ireland's grid operator had effectively blocked new data centre connections from 2021 amid concerns that the facilities were putting pressure on electricity infrastructure. That restriction ended in December 2025, but new connections are now required to provide their own on-site power generation.

Denmark, meanwhile, has proposed legislation that would place new data centres at the bottom of the priority list for grid connections as available capacity becomes tighter.

The proposal has the backing of parties representing around 80% of the Danish parliament and would give priority to households, healthcare, industry, transport and renewable energy projects.

US states impose restrictions and moratoriums

Several US states and local authorities have also tightened their approach.

In Pennsylvania, Governor Josh Shapiro signed an executive order requiring companies seeking to develop AI data centres to meet environmental and transparency safeguards and secure approval from local communities.

The order also removed data centres from the state's Fast Track permitting programme and barred agencies under the governor's authority from signing non-disclosure agreements with developers.

Texas Governor Greg Abbott ordered a pause on approvals for new data centre projects through the state's grid interconnection process amid concerns that rapidly rising electricity demand could threaten reliability.

Developers will also have to disclose more information on projected electricity and water use, tax incentives, ownership structures and measures intended to reduce effects on surrounding communities.

New York Governor Kathy Hochul imposed a one-year construction moratorium on data centres consuming 50 megawatts or more, making New York the first US state to enact a full moratorium of this kind.

During the suspension, the state's Department of Environmental Conservation will withhold new discretionary permits while standards are developed for assessing the environmental effects of data centres.

In Maine, Governor Janet Mills vetoed bipartisan legislation that would have imposed an 18-month moratorium on new data centres consuming more than 20 megawatts. Mills supported the principle of a temporary pause but objected to the bill because it did not provide an exception for a specific project in the town of Jay.

Residents of Monterey Park, California, took an even stronger position in June 2026, voting to permanently prohibit data centres following community opposition to a planned development.

The international trend highlights how the AI boom is increasingly becoming an infrastructure and resource-management issue as well as a technological one. For Thailand, the policy challenge is similarly shifting towards how to accommodate digital investment while protecting electricity and water security, managing environmental effects and ensuring that the economic gains remain within the country.