Ofgem, the British energy regulator, has unveiled a proposal to implement refundable deposit requirements for data centre developers seeking grid connections. Under the plan, operators would be required to pay upfront fees ranging from £237,500 to £712,500 per megawatt of power requested. A data centre requiring one gigawatt of capacity would face hundreds of millions in deposits, though these payments would be refunded upon project completion.
The proposal responds to a dramatic surge in grid connection requests. Electricity capacity sought by projects has grown from 41 gigawatts to 125 gigawatts over the past year, far exceeding Britain’s peak electricity demand of approximately 46 gigawatts as of 2025. Ofgem stated the new approach targets “speculative projects from securing scarce network capacity without any firm intention to connect,” preventing developers from reserving grid capacity without demonstrating genuine commitment. The regulator also plans to require projects to meet key milestones to maintain their position in the increasingly congested connection queue.
Data centres have become essential infrastructure supporting artificial intelligence development, but they face mounting opposition in communities near proposed sites. Residents have expressed concerns regarding noise pollution, electricity consumption, and substantial water usage required for cooling systems. Currently, 564 data centres operate across the UK, with Scotland emerging as a particularly attractive location due to its renewable energy resources. Approximately 24 Scottish data centres are in the planning phase.
Ofgem has launched a formal consultation on the proposals, running through 16 September. Eleanor Warburton, the regulator’s director for energy system design and development, emphasized that consumers should not absorb risks created by speculative projects occupying limited network capacity, as the connection queue has more than tripled in size within a single year.
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