Data centres could pay hundreds of millions in deposits for power demands
The regulator said a fee of between £237,500 to £712,500 per megawatt should be charged for upcoming projects.
Ofgem, the British energy regulator, has proposed new measures that could necessitate data centre developers paying deposits of hundreds of millions of pounds upfront for power connections. This proposal stems from a growing demand for grid connections, driven by the rise of artificial intelligence (AI) and the need for substantial computational power.
The fee, refundable upon project completion, ranges from £237,500 to £712,500 per megawatt of electricity. A project aiming for 1 gigawatt (GW) of power would require paying up to £712,500 upfront, with the amount refunded if the project proceeds as planned.
The proposal comes after a recent surge in electricity capacity requests, up from 41 GW to 125 GW in the past year, a sharp increase exceeding double the 2025 peak demand of approximately 46 GW. Ofgem is seeking feedback on these plans through a consultation until September 16. The regulator emphasized the need to manage speculative projects that consume scarce network capacity without genuine intent to connect.
Critics, including residents concerned about noise, electricity demand, and water usage for cooling, have opposed the construction of new data centres. Scotland, with its renewable energy resources, is increasingly viewed as a favorable location for such projects, with 24 currently in planning stages. Ofgem's aim is to prevent unviable projects from occupying network capacity while encouraging feasible, job-creating initiatives.
Energy Minister Michael Shanks from the Department for Energy Security and Net Zero welcomed the measures, stating they would facilitate the progress of viable projects and support economic growth.
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