Ofgem mulls fees for data center grid connection requests

Data center developers could be forced to pay an upfront fee when applying for grid connections, with the aim of wiping speculative projects from the queue.

With grid connections having long lead times and planning permission uncertain, developers have been making speculative applications. As a result, they account for a significant proportion of demand in the connections queue, currently amounting to around 73 GW.

This has been a problem for quite some time, and is only getting worse. Contracted demand offers increased from 41 GW to 125 GW between November 2024 and June 2025, driven largely by demand from data center projects, many of which may not actually go ahead. If that happens, energy regulator Ofgem said, other, more viable developments could be delayed and planning for future network investment efficiently made more difficult. 

Now, to try and combat the problem, Ofgem has opened a consultation into a proposal to require data center projects to pay between £237,500 and £712,500 per megawatt when they accept a connection offer. That’s equivalent to around 2.5% to 7.5% of average project costs.

The fee would be refunded when the project reaches energization but forfeited if it fails to progress according to the rules.

“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," said Ofgem’s director for energy system design and development, Eleanor Warburton. 

"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."

To keep their place in the queue, Ofgem suggests, data center developers would have to demonstrate tangible progress through evidence such as financial capability, commercial maturity and procurement activity. They would need to have a credible end-user of the data center, and procure electrical equipment such as switchgear with long lead times.

"These reforms will help free up capacity for viable projects, improve confidence in network planning and support faster connections where they are needed most," said Warburton. 

“By helping projects that are ready to move forward and connect more quickly, these reforms can also support economic growth, bringing forward investment, enabling businesses to be built and expanded sooner, and ensuring the benefits of that investment are felt across the economy more quickly.” 

However, there's a delicate balancing act between prioritizing viable projects and putting a dampener on AI development, said Mark Pestridge, managing director of Telehouse Europe.

"Ofgem’s proposal is an important initiative, but it must be implemented in a way that maintains the UK’s attractiveness as a destination for AI and digital infrastructure investment. A refundable fee-based approach should not deter serious investors, but create a more transparent connections process that gives viable projects greater certainty," he said.

“However, reforming the queue will not resolve the underlying capacity challenge. A long-term solution will require sustained investment in the grid, alongside much closer collaboration between data centre operators, local councils, National Grid and network operators at the earliest stages of planning."

The consultation is open until 16 September.