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A 15,000 sq metre datacentre near Perth will no longer go ahead after the developer withdrew plans amid community opposition over its impact on culturally significant sites.

The three-storey, 120-megawatt GreenSquare datacentre in the town of Hazelmere had been intended to power cloud computing and the acceleration of artificial intelligence, but faced fierce community backlash.

A City of Swan council review of the proposed development, which was to be located 15km east of Perth, attracted almost 1,900 public submissions.

The council last week released its responsible authority report into the datacentre, in which council staff recommended rejecting the proposal.

In the event of a power outage, the noise of the diesel generators needed to keep the centre in operation would exceed allowable daytime and night-time levels, the council found.

A nearby school and local residents would have faced the noise had the generators been in operation.

GreenSquare argued that the probability of a power failure requiring diesel generators to operate was low, and would only be temporary if it was to occur – but the council staff could not accept the potential for excessive noise.

The company’s chief executive, Charles Penny, wrote to the council on Friday to withdraw the application.

“This decision has not been made lightly. We continue to firmly believe that the proposed development is an appropriate use for this established industrial site in Hazelmere,” he said.

“Emergency generators are, by their nature, contingency infrastructure designed to operate only during rare network outage events and routine testing periods.”

He said was “unfortunate” that the assessment focused on the noise levels in an emergency scenario, and it “creates considerable uncertainty for future investment in critical digital infrastructure in Western Australia”.

Penny called for WA to have planning frameworks and assessments in place that are “practical, balanced, and reflective of the operational realities” of datacentres in order to “participate in this rapidly growing sector”.

Francesca Flynn, executive director of the Bibbul Ngarma Aboriginal Association, said the comments from GreenSquare “shows a deep lack of understanding” about the inappropriateness of the site.

“The site is within a highly sensitive context: approximately 40 metres from the river channel, adjacent to a conservation wetland, located on two Aboriginal heritage sites, next to a primary school and in close proximity to private residences,” she said.

Flynn said she is “full of relief and joy and gratitude” that the local community came together to protect the river and each other.

“This outcome sends a clear message that the community expects datacentres to be located in appropriately serviced industrial areas, not buffer zones along rivers and Aboriginal heritage sites,” she said.

The withdrawal was also welcomed by the federal Labor MP for Hasluck, Tania Lawrence.

“This is a significant win for Hazelmere and the broader community within the electorate of Hasluck,” she said. “The community has engaged constructively throughout and it’s right their voices have been heard.

“I am pleased to see GreenSquare [has] now formalised the withdrawal, saving the community from further anxiety.”