Ofgem is consulting on refundable deposits for data centre grid connections, proposing a fee of £237,500–£712,500 per MW. A 1 GW project could therefore face hundreds of millions up front, returned if the project meets milestones and is completed. The move responds to a surge in requests — from 41 GW to 125 GW in a year — and aims to stop speculative applications from blocking scarce network capacity. The consultation runs until 16 September.
Ofgem Proposes Large Refundable Deposits for Data Centre Grid Connections — Could Cost Hundreds of Millions
There are currently 564 data centres listed in the UK [Bloomberg via Getty Images]
Ofgem has proposed charging large refundable deposits from data centre developers that want to secure connections to the UK electricity grid. The move is intended to curb speculative applications and prioritise projects with a firm intention to connect, amid a surge in demand for capacity driven in part by growth in artificial intelligence services.
Details of the Proposal
The regulator is consulting on a refundable fee set between £237,500 and £712,500 per megawatt (MW). At that scale, a data centre seeking 1 gigawatt (GW) of capacity could face upfront deposits amounting to hundreds of millions of pounds, which would be returned if the project is completed successfully and meets required milestones. Ofgem's consultation runs until 16 September.
Why the Change?
Ofgem says the volume of capacity being requested to connect to the grid jumped from 41 GW to 125 GW over the past year — far above Ofgem's estimate of Britain’s 2025 peak demand at around 46 GW. The regulator argues that speculative applications are occupying scarce network capacity and creating risks for consumers and other developers.
How It Would Work
Under the proposals, projects would need to hit key milestones to keep their place in the grid-connection queue. Failure to meet milestones could lead to forfeiture of the deposit or removal from the queue. The refundable nature of the fee is designed to protect legitimate projects while discouraging those without concrete plans.
Eleanor Warburton, Ofgem's director for energy system design and development, 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."
Michael Shanks, Energy Minister at the Department for Energy Security and Net Zero, commented: "Ofgem's actions will help ensure that viable connection-ready projects can get going and not be held up by speculative applications. Britain needs a grid connections system that works for the 21st century and allows businesses to invest and grow, creating jobs across the country."
Local Concerns and Wider Context
Data centres are essential infrastructure for cloud services and the computing power required by AI, but they can attract local opposition. Residents commonly raise concerns about noise, high electricity consumption, and the substantial volumes of water sometimes needed for cooling high-performance chips. Developers and planners are increasingly under scrutiny as more projects are proposed.
Current UK Landscape
According to The Data Centre Map, there are 564 data centres listed in the UK. Scotland is often highlighted as an attractive location for new facilities because of abundant renewable energy; 24 projects are currently in planning there.
Potential Impacts: The deposit requirement could deter speculative applicants and free up network capacity for viable projects, but it may also raise barriers for smaller developers or new entrants without access to large capital reserves. The consultation will determine final policy design, including deposit levels, milestone requirements, and refund conditions.
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