Ofgem could soon introduce ‘commitment fees’ and tougher progress checks for data centre projects seeking access to Britain’s electricity network.
The regulator hopes the reforms will prevent speculative developments from reserving scarce grid capacity without a firm intention or ability to proceed, potentially delaying other projects that are ready to invest and begin construction.
Demand connection offers have more than tripled in less than a year, rising from 41 GW in November 2024 to 125 GW by June 2025. Ofgem says that surge has been driven largely by data centres, which account for at least 80 GW of applications.
While not every project in a grid connection queue is expected to reach construction, Ofgem is concerned that the number of potentially unviable data centre developments is distorting network planning and making it harder for credible projects to secure timely connections.
A price for reserving grid capacity
Under the proposals, large data centre developments would pay a Data Centre Commitment Fee when accepting a connection offer.
The fee would be set between £237,500 and £712,500 per megawatt, equivalent to around 2.5% to 7.5% of the average cost of a project. It would be refunded once the data centre reaches energisation, but forfeited if the development leaves the queue early.
That could represent a significant upfront financial commitment for large developments, but Ofgem believes it is necessary to ensure companies are serious about delivering the projects for which they have requested network capacity.
Developers could also be required to meet new data centre-specific queue management milestones. These would require companies to provide evidence of tangible progress, including financial capability, commercial maturity and procurement activity, if they want to retain their position in the queue.
The regulator hopes the combined measures will clear space for viable developments while providing network operators with a more accurate picture of future electricity demand.
Eleanor Warburton, Ofgem’s Director for Energy System Design and Development, noted, “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.
“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.
“We’re consulting on a new data centre commitment fee and stronger requirements to ensure projects demonstrate real commitment before securing scarce network capacity. These reforms will help free up capacity for viable projects, improve confidence in network planning and support faster connections where they are needed most.
“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.”
Data centre growth puts pressure on the grid
The proposals form part of a wider Demand Connections Reform programme being developed by Ofgem, the Department for Energy Security and Net Zero and the National Energy System Operator.
That programme is based around three areas: removing speculative projects from the queue, prioritising strategically important developments and finding new ways to accelerate physical grid connections.
There is already evidence that taking a tougher approach to stalled projects can free up capacity. Ofgem says wider connection reforms have accelerated around 7.8 GW of projects by an average of six years.
It will now hope to achieve a similar result for electricity demand connections, particularly as data centres become an increasingly significant source of proposed power consumption.
The industry has repeatedly warned that delays in securing electricity connections are becoming one of the biggest barriers to delivering new data centre capacity in the UK. However, allowing companies to reserve capacity for projects that may never be built risks making that problem worse for developments that are genuinely ready to proceed.
Ofgem’s challenge will be to ensure its proposed fees are high enough to deter speculative applications without creating another obstacle for credible projects already facing steep development and infrastructure costs.
The plans are currently in consultation until September 16, with responses informing Ofgem’s final policy decision.
