Ofgem acts to free up grid capacity by tackling speculative data centre projects

Ofgem has today (29 July) launched a consultation on plans to tackle speculative data centre projects in Britain's electricity connections queue, as part of a wider programme of reforms to ensure network capacity is used for projects that are ready and able to connect.  

The proposals – which include the introduction of a commitment fee and new project progress milestones – come as demand connection applications have surged from 41 gigawatts (GW) to 125GW, in under a year. This rise is driven largely by data centre projects, accounting for at least 80GWs.

The reforms will help: 

• protect consumers
• improve confidence in network planning 
• clear the way for viable projects to connect faster

The regulator is proposing a new Data Centre Commitment Fee, which would be paid by large data centre developments when accepting a connection offer. The fee would be refunded when the project reaches energisation and forfeited if the project exits the queue early.  The fee would be set within a proposed range of £237,500 to £712,500 per megawatt, equivalent to around 2.5% to 7.5% of average project costs.  

The proposals are aimed at tackling speculative projects from securing scarce network capacity without any firm intention to connect, ensuring the queue enables investment ready, viable projects.  

The proposals from the regulator follow a sharp increase in demand connection applications, with contracted demand offers increasing from 41GW to 125GW between November 2024 and June 2025, driven largely by demand from data centre projects. Ofgem is concerned that a significant number of projects in the queue may not ultimately proceed, potentially delaying viable developments and creating misleading signals about future network investment needs.   

Since the introduction of wider connections reform measures, around 7.8GW of projects have been accelerated by an average of six years, helping to bring forward investment and enabling projects to connect much sooner than would otherwise have been possible.  

Ofgem expects these reforms to have a similar impact on demand connections, helping ready projects secure timely access to the grid while freeing up capacity held by speculative applications. 

Alongside the proposed fee, Ofgem is consulting on new Data centre specific queue management milestones that would require developers to demonstrate tangible progress through evidence such as financial capability, commercial maturity and procurement activity if they wish to retain their place in the queue. Together, these measures are designed to ensure scarce grid capacity is used for projects that are actively progressing towards delivery, rather than speculative projects that may never connect.  

Ofgem’s Director for Energy System Design and Development Eleanor Warburton 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.  

“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.”  

The consultation forms a key part of Ofgem, DESNZ and NESO’s wider Demand Connections Reform programme, which is built around three pillars: 

• Curate: to ensure only viable projects enter and remain in the queue
• Plan: to support government-led prioritisation of strategically important projects
• Connect: to accelerate physical grid connections  

Demand for electricity connections is growing rapidly as sectors across the economy electrify and new large-scale power users seek access to the grid. Data centres currently account for a significant proportion of demand in the connections queue, with around 73GW referenced in Ofgem's consultation.

Ofgem's assessment is that a queue containing a large number of non-viable projects risks slowing down projects that are ready to proceed, while also making it more difficult to plan future network investment efficiently. The reforms are intended to create a queue made up of projects that are both viable and capable of progressing to connection.   

The consultation is open until 16 September 2026.

Notes to editors  

• read the full consultation on proposed data centre connection reforms
• the consultation concerns reforms to electricity demand connections, with an initial focus on data centre projects
• proposed measures include a Data Centre Commitment Fee and introduction of Data centre specific queue management milestones for projects seeking to retain queue positions
• the consultation forms part of Ofgem's wider Demand Connections Reform programme, structured around the Curate, Plan and Connect pillars
• demand connections reform aims to ensure viable projects can connect in a timely manner and enable strategically important demand projects to connect faster where appropriate
• responses to the consultation will inform Ofgem's final policy decisions
• Curate focuses on reducing speculative, non-viable projects in the queue and ensuring viable projects are able to progress as quickly as possible to connection 
• Plan, led by government, focuses on how to plan for growth in data centre sector alongside the energy system, and prioritise strategic projects through the connections system  
• Connect focuses on developing new approaches and connection arrangements to accelerate and increase the number of connections, while maintaining a secure system