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Datacentre projects could face fees for grid access to ease connection queue, Ofgem says
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Britain's energy regulator, Ofgem, has proposed that datacentre projects pay substantial upfront fees to secure grid connections, aiming to clear a massive backlog in the connection queue. The move targets speculative schemes that have clogged the system, with 315 datacentres currently waiting to connect, representing 73 gigawatts (GW) of demand. This figure is nearly 30 GW above the country's peak energy demand of 45 GW, highlighting the scale of the bottleneck.
Under the proposals, datacentre providers such as Amazon and Microsoft would need to lodge financial pledges of £350 million to reserve 500 megawatts of grid capacity. These funds, provided via letters of credit, bonds, or cash deposits, would be required when a connection offer is received and returned only after the facility is operational. The policy aims to ensure that limited grid capacity goes to projects most likely to be built, not those merely preserving options.
Ofgem also introduced "hard milestones" for projects, including securing customers and financial backing, with failure to meet these targets resulting in removal from the queue. The regulator noted a surge in connection applications between November 2024 and June 2025, with 140 proposed datacentres accounting for 50 GW of demand. Both numbers have since risen, according to data released on Wednesday.
Datacentres are critical to Britain's artificial intelligence ambitions, serving as the infrastructure for tools like chatbots. However, their growing energy needs have become a significant obstacle. The proposals aim to address this by preventing speculative projects from tying up capacity needed for viable developments.
Industry perspectives highlight the global nature of the issue. The Uptime Institute, which inspects datacentres, identified 250 global projects exceeding 100 MW in energy demand announced between 2021 and 2024. It believes half of these projects will either not happen or be delayed, yet still expects an "unprecedented and rapid" increase in power demand over the next five years.
Ofgem's proposals will now undergo a consultation process to test their feasibility. The regulator's move follows broader reforms by the grid operator Neso, which last year cleared hundreds of dubious "zombie" projects from the renewable energy queue. These efforts signal a concerted push to streamline grid connections, though challenges remain in balancing growth with infrastructure constraints.
