Ofgem proposes data centres pay hundreds of millions in deposits to secure grid connections

Data centres could pay hundreds of millions in deposits for power demands

Ofgem has proposed new measures which could see developers of data centres made to pay hundreds of millions of pounds up front. The British energy regulator said a refundable fee should be charged for projects that want to connect to the network, amid mounting demand for connections to the electricity grid. It is proposing developers pay a deposit between £237,500 to £712,500 per megawatt - meaning data centres seeking 1 gigawatt (GW) of power would have to pay hundreds of millions up front, paid back if the project was completed. The proposal follows growing opposition in parts of the country to plans for new data centres, which are needed to power the artificial intelligence boom. Data centres are large buildings which house computer servers used to store and process data and run the digital services which power the internet. Ofgem has started a consultation on its proposals, which will run until 16 September. It said the amount of electricity capacity being requested by projects seeking to connect to the grid had risen from 41 GW to 125 GW in the past year, reflecting a sharp increase in demand. This is significantly more than double 2025's peak electricity demand in Britain of around 46 GW. The regulator said the projects would have to hit key milestones to keep their place in the grid connection queue, which has seen a surge in demand. An increasing number of centres have been built around the world in recent years to provide the computing power needed to train and run AI systems. But they are controversial, especially for people who live near them. Residents have raised concerns about noise, electricity demand and the large amounts of water sometimes used to cool the high-performance chips that generate vast amounts of heat. There are currently 564 data centres listed in the UK, according to the data centre map. Scotland in particular is seen as a good location for future projects due to its supply of renewable energy to power the centres, with 24 currently in the planning process. Ofgem said the plans were aimed at tackling "speculative projects from securing scarce network capacity without any firm intention to connect". Eleanor Warburton, the regulator's director for energy system design and development, said: "Britain's electricity demand connections queue has more than tripled in size in less than a year, and consumers should not bear the risks created by speculative projects taking up space in the system." Sign up for our Tech Decoded newsletter to follow the world's top tech stories and trends. Outside the UK? Sign up here.

Datacentre projects could face fees for grid access to ease connection queue, Ofgem says

Energy regulator's plan would mean upfront fees or financial security via letters of credit, bonds or cash deposits Datacentre projects in Britain will be forced to put down significant upfront fees to secure an energy connection under proposals to ease an electricity grid logjam. Ofgem, the sector watchdog, said there are 315 datacentres currently queueing to connect up, representing 73GW of demand. This is almost 30GW above the entire country's peak energy demand of 45GW. Under the energy regulator for Great Britain's proposals to thin out speculative schemes, projects will be required to lodge significant upfront fees or financial security via letters of credit, bonds or cash deposits. This will be demanded when a project receives a connection offer and returned when the datacentre is switched on. Ofgem is proposing that datacentre providers, who include companies such as Amazon and Microsoft, put down pledges of £350m to reserve 500MW of grid capacity. The proposals are aiming to tackle one of the biggest obstacles to building the datacentres at the core of Britain's AI ambitions: connections to a power source. Datacentres are the central nervous systems of AI tools such as chatbots but they have increasingly sizeable energy needs as their usage and capability grows. Ofgem said projects will be required to hit targets during the connection application process and will be removed from the queue if they do not meet them. The watchdog added that "hard milestones" would include securing customers and financial backing, stressing it wanted to ensure limited grid capacity went to "projects most likely to be built, not projects preserving options". The proposals will now undergo a consultation process, Ofgem said, to test their feasibility. Ofgem revealed in February there had been a "surge in demand" for connection applications in general between November 2024 and June last year, with a significant number coming from datacentres. It said there were 140 proposed datacentres with energy demands of 50GW - both numbers that have risen since then, 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 a grid connection. Last year the grid operator, Neso, announced it was reforming the queue for renewable developers to be hooked up, clearing hundreds of dubious "zombie" projects - those without the right planning permissions or financing to move forward - to make way for schemes with the best chance of delivering on time. Ofgem's 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 - that have been announced between 2021 and 2024. Uptime believes half of those projects will either not happen or their completion will be delayed. Even in that scenario, there will still be an "unprecedented and rapid" increase in the power required over the next five years, according to Uptime.