What’s next for data centres and securing power

In our article in July, we reported on the latest Ofgem intervention into data centre grid connections – the consultation introducing a data centre commitment fee and specific data centre queue management milestones. Since then, the initial proposal for a National Policy Statement for Data Centres[1] has been published and the government has released its response to “accelerating electricity network connections for strategic demand”[2]. In this article we will cover what these reports detail and what is next for data centre grid connections.

Securing a viable grid connection continues to be one of the key risks for data centre projects. We heard in October that Microsoft pulled out of Nscale’s AI data centre in Essex over concerns of power delays and how UKPN would not be able to supply enough power until the early to mid-2030s[3].

With continued questions over how to solve insufficient power and grid delays, the government announced in the Autumn budget the prioritisation of strategic data centres. One of the key themes emerging from the budget was how the government consider that data centres are now as fundamental to our economy as railways and electricity networks. The government estimates that the UK will need 6 GW of AI data centre capacity by 2030 to protect the national interest and secure local access to AI models. In the budget, a Data Centre Covenant was announced to ensure the most strategic data centres are prioritised.

The Data Centre Covenant encourages all data centres to:

• Lower electricity bills: pay for their fair share of energy so that households, communities and other businesses do not pick up the bill. They should also support grid resilience, flexibility and clean power.
• Invest in improving local communities: strategic data centres should agree a Local Benefit Plan that commits to substantial investment, developed with the local community and linked to the development’s size.
• Adhere to the highest environmental standards: protect nature, minimise water use and publish annual energy and water consumption reports. They should also capture the heat they produce for nearby homes, schools, hospitals or businesses.
• Create jobs, apprenticeships, and drive reindustrialisation: create local jobs and invest in paid apprenticeships and training places. They should prioritise UK suppliers and technologies and make a meaningful contribution to the development and deployment of British AI hardware.
• Strengthen Britain’s security: provide secure and reliable access to compute the UK needs, including for our NHS and other public services. They should work with the relevant national technical authorities, including the National Cyber Security Centre, to enhance resilience against cyber and hybrid threats.

In return, a new Ministerial Control Centre will accelerate time to power for strategic data centres. The budget refers to the following interventions:

1. Prioritise strategically important demand projects, including data centres, by reserving future capacity and reallocating capacity released when other projects leave the connections queue, using new Planning and Infrastructure Act powers.
2. Collaborate with NESO and network companies to identify locations where capacity may be available before 2030, using Planning and Infrastructure Act powers to access this capacity.
3. Accelerate connections before 2030, where there is a need to go further, using new Planning and Infrastructure Act powers.
4. Enable access to temporary on-site behind the meter solutions prior to the grid connection being available.

Further details are awaited on what a “strategic data centre” is defined as and the criteria such projects will be expected to meet. We also await confirmation on when evidence is to be submitted by, who will assess compliance and how the requirements will be enforced.

Behind the meter power

Data centre developers have already been considering the use of microgrids and private networks to solve grid delay issues. These alternatives require consideration around network resilience and security of supply. The use of temporary on-site behind the meter (BtM) power also raises these questions along with queries on:

• what happens to the temporary BtM power once the data centre is connected to the local grid;
• could the BtM power become a back-up power solution;
• will the BtM power require an import connection, if so, how long will this connection take; and
• who will own the grid infrastructure distributing the power from the BtM solution to the data centre – will this be privately owned, adopted by an IDNO or will this require transmission ownership using an ITO (once established).

The draft proposal for a National Policy Statement for Data Centres sets out that BtM power will only be available to strategic data centre developers that can demonstrate the following:

1. that you cannot avoid the use of BtM power, and you have exhausted all other options to accelerate access to the local grid;
2. that you will only use BtM power as a temporary solution, not a long term solution;
3. how you will mitigate the impacts of temporary BtM power on carbon emissions and energy security; and
4. how your data centre project will deliver wider energy system, decarbonisation, and economic benefits beyond powering just your data centre.

Good citizenship

While the Data Centre Covenant is aimed at prioritising “strategically important data centres”, we expect to see “good citizenship” requirements applied generally to data centre grid connections in the UK. NGED, for example, is considering further criteria for data centre connections which include: (i) co-location with solar and storage generation BtM; (ii) providing community resources such as district heating for nearby homes; and (iii) using closed-loop water reuse on site.

There are examples internationally of various “good citizenship” requirements already being enforced via policy. Ireland, for example, requires data centres to meet at least 80% of their annual demand with additional renewable energy[4]. In Scotland, an industry charter has been launched which sets out 5 core principles[5] to underpin the design and development of all new data centres, this includes all new data centres being district heat ready and using closed-loop cooling systems that minimise water consumption.

In Germany there are requirements regarding the use of waste heat and for the data centre’s power requirements to be covered entirely by renewable sources, however there is a draft bill to relax such. In America, some states require data centres to participate in electricity demand response programmes or agree to be disconnected first in case of a shortage of power supplies. Some states have also pursued transparency legislation requiring data centres to report information about their energy use to inform regulators about their impacts to the grid.

What is next for data centre connections

The government intends to proceed with two key measures: (1) enabling NESO to prioritise strategic demand projects identified by the government; and (2) aligning data centre connections after 2030 to regional infrastructure targets. Together, these measures are intended to ensure that network capacity is directed towards projects that support the government’s strategic priorities, aligning infrastructure investment with regional growth ambitions.

In the government’s response, they confirm their support for the proposals set out in Ofgem’s

‘Curate – Demand Connections Reform’, including the proposed introduction of the data centre commitment fee and enhanced progression milestones for data centre connections. A published response from Ofgem is expected before the next Gate 2 application window.

In terms of next steps, the government’s response sets out the following:

Whilst there are a number of new requirements and policies expected for data centre connections, there is currently no certainty around when these additional requirements will be enforced, what this means for data centre developers who already hold grid offers or for developers looking to obtain new grid offers. The various policy responses and consultations are strong indicators that the government is prioritising grid connections for data centres, but details are awaited on what these ‘strategic data centres’ will be and what ‘good citizenship’ requirements they will have to comply with. We also await confirmation on when the next Gate 2 application window will be, latest reports refer to the window being scheduled in mid-2027.

With significant reforms to data centre connections and power allocation on the horizon, now is the time to assess the impact on your development plans. If you’d like to discuss securing power, grid connection strategies or emerging regulatory requirements, contact Sophie Linnell, Ben Sheppard or Hannah McMurray in our Infrastructure and Energy team.

[1] Draft National Policy Statement for Data Centres – GOV.UK

[2] https://assets.publishing.service.gov.uk/media/6ae1fbb8088f42d99bbe781b/accelerating-network-connections-government-response-web.pdf

[3] Microsoft pulls out of UK Nscale data centre deal over power delay | Reuters

[4] Review of Large Energy Users Connection Policy | CRU.ie

[5] Delivering Green Data Centres | Sustainable Digital Infrastructure Principles | Apatura