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

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 were 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 at tackling 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 would be required to hit targets during the connection application process and would be removed from the queue if they did not meet them. The watchdog added that “hard milestones” would include securing customers and financial backing, and it stressed 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.

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.

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