Datacentre projects in Britain could face significant upfront fees to secure energy connections under proposals from Ofgem, the energy regulator, aimed at easing a logjam in the electricity grid connection queue. The regulator said there are currently 315 datacentres waiting to connect, representing 73GW of demand—nearly 30GW above the UK's peak energy demand of 45GW.
Proposals to thin out speculative schemes
Under Ofgem's plans, projects will be required to lodge upfront fees or financial security via letters of credit, bonds, or cash deposits when they receive a connection offer. This amount would be returned once the datacentre is operational. The proposals target speculative projects that reserve grid capacity without progressing to construction.
Ofgem is proposing that datacentre providers, including companies such as Amazon and Microsoft, put down pledges of £350 million to reserve 500MW of grid capacity. The move addresses one of the biggest obstacles to building datacentres, which are central to Britain's AI ambitions but have increasingly large energy needs.
Hard milestones and removal from queue
Projects will be required to meet hard milestones during the connection application process, including securing customers and financial backing. Those that fail to meet these targets will be removed from the queue. Ofgem emphasized it wants to ensure limited grid capacity goes to "projects most likely to be built, not projects preserving options."
The proposals will now undergo a consultation process to test their feasibility, Ofgem said.
Surge in datacentre demand
Ofgem revealed in February a surge in connection applications between November 2024 and June 2024, with a significant number from datacentres. At that time, there were 140 proposed datacentres with energy demands of 50GW. Both numbers have since risen, according to data released by Ofgem on Wednesday.
The boom in datacentre demand comes amid a wider backlog in power generation and storage schemes waiting for grid connection. Last year, the grid operator Neso announced reforms to clear hundreds of dubious "zombie" projects—those without proper planning permissions or financing—to make way for schemes with the best chance of delivering on time.
Global context
Concerns over datacentre grid connections are not confined to Britain. The Uptime Institute, which inspects and rates datacentres, has identified 250 global datacentre projects exceeding 100MW in energy demand—equivalent to the energy needs of about 300,000 homes—announced between 2021 and 2024. Uptime believes half of those projects will either not happen or be delayed. Even so, there will still be an "unprecedented and rapid" increase in power required over the next five years, according to Uptime.
