Premier Ben Carroll announced on Tuesday if re-elected his government would introduce regulations for the controversial facilities, following an earlier agreement among state and territory leaders to impose national guardrails.
Under Victoria's proposed changes, data centres in Victoria would need to source their own clean energy, either through their own renewable programs or by investing in green-energy projects, as well as cover any additional infrastructure costs.
They would also be prevented from using the state's drinking water, as well as be banned from being built in residential areas and near schools or childcare centres.
The rules, however, would not apply to existing data centres, or those already being assessed for approval, leading to opposition claims the proposed legislation was "irrelevant".
"Right now data centres are being built in residential areas, so it actually doesn't matter what Ben Carroll says ... there are data centres being built in a way that residents are deeply concerned about," opposition spokesperson James Newbury said.
It comes amid significant community concern over what an influx of power-hungry data centres would mean for the electricity grid and environment.
In August, state and territory leaders agreed during a National Cabinet meeting that large data centres require consistent national standards regarding energy, water and land-use.
Victoria already has more than 50 functioning data centres and the government has welcomed further development as generating jobs and investment, with a capital expenditure of $5.8 billion in the last year.
As well as banning data centres from residential zones, for those living in industrial zones, a minimum 150-metre buffer zone would exist between new data centres constructions and homes.
Data centres would also only be permitted to use recycled or non-drinking water for cooling, and offset any drinking water they do initially require and pay for infrastructure upgrades.
But industry representatives claim limitations already exist under the state's environmental and planning framework.
"Victoria's planning system already restricts data centres to industrial zoned land, assesses actual impact and allows for conditions on a site-by-site basis under the state's environmental and planning framework," Data Centres Australia chief executive Belinda Dennett said.
The constraints will have a detrimental impact on already-made investment decisions, Ms Dennett claimed, arguing data centres should be situated near the industries they support.
Victoria's digital economy minister, Anthony Carbines said data centres support vital services like banking, healthcare, transport and emergency services.
The Federal Government is in the process of shaping mandatory national standards for data centres, releasing a consultation paper on Thursday.
The paper proposes that data centres would be required to bring on new renewables and firming to fully offset their energy demand.
In August, the NSW government announced plans similar to Victoria's to mandate water and energy usage for data centre projects wanting to access the state's fast-tracked approvals program.
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