Ofgem, the UK’s energy regulator, has unveiled a proposal requiring data centre developers to pay substantial upfront deposits as a condition for connecting to the national electricity network. The proposed fees would range from £237,500 to £712,500 per megawatt of power capacity sought, meaning large facilities requiring 1 gigawatt would face costs in the hundreds of millions of pounds. These deposits would be refundable upon project completion, according to the regulator’s framework.
The proposal responds to unprecedented growth in electricity connection requests, which have increased from 41 gigawatts to 125 gigawatts over the past year. This level of demand is more than double Britain’s peak electricity usage of approximately 46 gigawatts, placing significant strain on grid infrastructure. Ofgem stated the measure aims to prevent speculative projects from occupying scarce network capacity without genuine intent to proceed with construction.
Data centres, which house the computing infrastructure powering digital services and artificial intelligence systems, have become increasingly controversial in many regions. Community opposition has focused on concerns including operational noise, substantial electricity consumption, and water usage required for cooling high-performance computing equipment. Scotland has emerged as a particularly attractive location for future developments due to its renewable energy resources, with 24 facilities currently in the planning process.
Ofgem’s consultation on the proposed deposit scheme will remain open until 16 September. The regulator indicated that approved projects would need to meet key performance milestones to maintain their position in the grid connection queue. Energy minister Michael Shanks expressed support for the initiative, characterizing it as necessary to ensure viable projects can proceed without delays caused by non-committal applications and to modernize Britain’s connection system for 21st-century demands.
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