Data centres could pay hundreds of millions in deposits for power demands
The regulator said a fee of between £237,500 to £712,500 per megawatt should be charged for upcoming projects.
Data center developers may face upfront payments totaling hundreds of millions of pounds for their electricity needs, under new proposals from Ofgem. The UK currently lists 564 data centers.
The British energy regulator has suggested implementing a refundable fee for projects seeking to connect to the national grid, in response to escalating demand for such connections. Ofgem's proposal involves developers paying a deposit ranging from £237,500 to £712,500 per megawatt. This means a data center requiring 1 gigawatt (GW) of power would need to pay hundreds of millions upfront, with the sum returned upon project completion.
This proposal comes amid growing local opposition in various parts of the country to new data center developments, which are essential for the burgeoning artificial intelligence sector. Data centers are large facilities housing computer servers that store and process data, powering the internet's digital services.
Ofgem has initiated a consultation on these proposals, set to conclude on September 16. The regulator noted a significant increase in requested electricity capacity for grid connections, rising from 41 GW to 125 GW in the past year, indicating a sharp surge in demand. This figure is substantially more than double Britain's projected peak electricity demand for 2025, which is around 46 GW.
The regulator also stated that projects would need to achieve specific milestones to maintain their position in the increasingly crowded grid connection queue.
Globally, the number of data centers has grown in recent years to provide the computing power necessary for training and operating AI systems. However, these centers are a source of controversy, particularly for nearby residents. Concerns raised include noise pollution, high electricity consumption, and the substantial amounts of water sometimes used to cool the high-performance chips that generate considerable heat.
According to the data center map, there are currently 564 data centers listed in the UK. Scotland is considered a prime location for future projects due to its abundant supply of renewable energy to power these facilities, with 24 centers currently in the planning stages.
Ofgem explained that these plans aim to prevent "speculative projects from securing scarce network capacity without any firm intention to connect." Eleanor Warburton, Ofgem's director for energy system design and development, commented, "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."
Related stories include "I can't drink the water' - life next to a US data centre," "Why are thousands of people opposing a new data centre?", and "Data centres to be expanded across UK as concerns mount."
For updates on global tech stories and trends, sign up for the Tech Decoded newsletter. For those outside the UK, sign up here.