Ofgem targets datacentre builds with megawatt connection charge | Computer Weekly

Energy regulator Ofgem has proposed changes to datacentre grid connectivity to manage capacity while prioritising what the government deems “strategically important” projects.

Ofgem said the electricity grid has experienced higher demand for connectivity due to the expansion of datacentres.  Between November 2024 and June 2025, it reported that contracted demand in the connection queue increased from 41GW to 125GW. Out of this, around 73GW are datacentres. For comparison, it said peak demand in Great Britain in 2025 was 45GW.

The proposals are aimed at tackling speculative projects from securing scarce network capacity without any firm intention to connect, ensuring the queue for connectivity enables investment-ready, viable projects.  

According to Ofgen, both the number of applications for grid connectivity and the size of capacity being sought is also increasing. It warned that the scale of this demand from datacentre firms is such that even if the percentage of non-viable and speculative connection applications  were lower than other sectors, the impacts would still be considerable.

To curb demand, Ofgem has proposed a Data Centre Commitment Fee, which would be paid by large datacentre developments when accepting a connection offer. The fee would be refunded when the project reaches energisation and forfeited if the project exits the queue early. Ofgem said the fee would be set within a proposed range of £237,500 to £712,500 per megawatt, equivalent to around 2.5% to 7.5% of average project costs.

The regulator has raised concerns that a significant number of projects waiting for approval of grid connectivity may not ultimately proceed, which potentially impacts  viable projects and creates a misleading signal about future network investment needs.   

Since the introduction of wider connections reform measures, around 7.8GW of projects have been accelerated by an average of six years. According to Ofgem, this has helped to bring forward investment and enabled projects to connect much sooner than would otherwise have been possible.  

Ofgem expects the proposed reforms to have a similar impact on demand connections, helping to ready projects secure timely access to the grid while freeing up capacity held by speculative applications. 

Alongside the proposed fee, Ofgem is also consulting on a datacentre-specific queue management milestones that it said means developers will need to demonstrate tangible progress through evidence such as financial capability, commercial maturity and procurement activity if they wish to retain their place in the queue for grid connectivity. Specifically, projects that meet the criteria for grid connectivity will need to provide evidence at defined milestones to demonstrate: a credible end-user of the datacentre, procurement of long-lead electrical equipment, and financial and technical capability to develop a datacentre to energisation, which involves the commissioning of power.

Commenting on the proposed changes, Ofgem’s director for energy system design and development, Eleanor Warburton 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.  

“The connections system must work for consumers and for the projects that are ready to invest, build and connect. Where speculative projects take up space in the queue, they can delay other schemes and create uncertainty about future network needs.  

“We’re consulting on a new datacentre commitment fee and stronger requirements to ensure projects demonstrate real commitment before securing scarce network capacity. These reforms will help free up capacity for viable projects, improve confidence in network planning and support faster connections where they are needed most.”