Data Centre Covenant: UK government targets simplified planning, community incentives with digital infrastructure build-out

Chancellor John Healey's Autumn Budget yesterday included a package of measures aimed at driving data center growth while keeping local communities on side.

Under the new Data Centre Covenant, developers will be expected to make 'credible' commitments for the grid capacity they request, support security of supply, and invest in clean power and net zero while offering benefits to local residents and businesses.

"This Covenant sets out a clear offer: government will support faster and more certain delivery of the data centers the country needs in return for responsible development that delivers lasting benefits for communities," the government said.

"Together, these measures will help keep more of the benefits of AI in Britain, supported by infrastructure that serves our long-term interests."

Data center developers will be expected to agree to a Local Benefit Plan that commits them to 'substantial' investment, developed with the local community and linked to the project’s size. This can be spent on local priorities like transport, parks, and town centers.

Firms will also be asked to minimize water and power use, and to harness waste heat for local homes, schools, hospitals, or businesses wherever practical.

"Developers should create good, well-paid jobs that last beyond construction. They should recruit locally where possible and invest in apprenticeships, colleges and universities,” Downing Street said in a statement.

“Where roles cannot currently be filled locally, they should invest in education and training to enable more local people to access these opportunities in the future."

Elsewhere, data centers should provide secure, resilient UK access to compute for critical services and national priorities, meeting current and future cyber resilience standards.

They should also work with suppliers to develop plans for foreseeable disruption, and take part in government exercises to test arrangements for prioritizing essential services.

Mixed industry reaction

Much of this is aspirational, rather than a set of hard-and-fast rules. Walter Kulvik, digital infrastructure partner at law firm Simmons & Simmons, said most developers are operating under similar principles already.

"Commentary around public support for data center developments has been an increasing issue for a number of years, and major data center developers have already put investment in local communities - both in terms of job creation and development of public infrastructure - into their development plans and budgets," he said.

"As such it is unclear whether the government’s proposal will make much of a difference for the bigger sites and developers."

For developers that can fulfil the criteria, the government will establish a new Ministerial Control Centre aimed at speeding up access to electricity connections.

This will use new powers in the Planning and Infrastructure Act to prioritize strategically important projects by reserving future capacity and reallocating capacity when other projects leave the connections queue.

It will also work to identify locations where capacity may be available before 2030 and enable access to temporary power to bridge the gap to grid connections.

Ash Gawthorp, CTO at Scale Factory, said that despite these measures, power constraints are likely to continue.

"The British data centre covenant acknowledges a real constraint. Faster grid connections and on-site generation might help projects move forward, but they will not make wider power infrastructure problems disappear," he said.

"A major AI data center project in Essex has already lost its anchor customer after grid delays pushed its expected connection into the 2030s. Keeping sensitive NHS and defence data in Britain will require dependable electricity infrastructure."

Kulvik noted that encouraging community investment by offering prioritized grid access or permits for on-site power generation could incentivize the building of larger-scale data centers, particularly where the community investment costs would be a marginal part of the overall cost.

Small-scale developments, though, could find it harder to balance the books.

Matthew Baynes, VP for secure power and data centers at Schneider Electric, said the chancellor’s announcement nonetheless represents a “significant opportunity for a new era of responsible data center development”.

“The opportunity now is for government, energy providers and the data centre industry to work together to turn this commitment into action,” he commented.

“By embracing innovative energy technologies and taking a more integrated approach to infrastructure planning, we can unlock the next wave of AI investment while ensuring data centre growth is sustainable, resilient and delivers lasting value to the communities it serves.”

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