Can the grid keep pace with the UK's data centre ambitions?

Charles Deacon, Technical Director of Grid at Eclipse Power, explains why high electricity costs and lengthy connection delays could threaten UK data centre growth – and why more flexible routes to the grid will be essential.

The UK has spent the last year positioning itself as an AI superpower. But there’s a difference between our ambitions and the realistic chances of delivery. The pause of OpenAI's Stargate UK project was a high-profile reminder of the challenges created by high energy prices and grid connection delays – challenges that are now central to whether major projects can move forward at all, and to whether the electricity network can keep pace with growing demand.

Is the UK losing the data centre race?

It’s worth keeping a cool head and being realistic about the UK’s attractiveness for developers. The UK retains real advantages for the data centre market. It’s geopolitically stable, has a favourable policy environment, reliable – albeit expensive – power, a temperate climate and genuine demand for the tech. In other words, the fundamentals are there.

That said, the data centre market isn’t uniform. There is nuance across data centre types, and not all areas of the market are equally mobile. Cloud development is often quite strongly anchored to its fibre routes – for example, most UK-serving cloud data centres are in West London – but hyperscalers and big tech developers are internationally mobile. These organisations are most able to shift their investment to different regions, and they’ve already shown their willingness to do so.

Why should that trouble us in the UK? High industrial energy prices are the first issue. The average transmission demand residual charge has risen by around 64% in a single year (2025/26 to 2026/27), meaning that large users are facing steep bill increases on the transmission element of their charges. That’s a direct result of two price-control periods that failed to incentivise grid investment for a renewable grid, now being corrected all at once.

While this certainly isn’t a dealbreaker for data centre developers, it is nonetheless a worrying trend that – without recourse – can continue to make the economics of new projects more difficult to manage.

The thornier problem is the connection timeline. The demand connection queue has exploded, with Ofgem’s figures showing an increase from 41 GW to 125 GW in the eight months from November 2024 to June 2025 alone. Within that, transmission-connected demand surged from 17 GW to 97 GW – more than fivefold. In my estimation, over 100 GW of the total queue will be unable to connect before 2030; a fresh application today could take up to 15 years to get a connection.

This is due in part to the influx of data centre projects themselves, but also to supply chain issues constraining National Grid’s ability to build at a pace sufficient to match demand, and to the historical omission of serious distribution-level demand reform within the overall connections reform agenda.

Happily, Ofgem is alert to the problem. In July, it launched a consultation on a new data centre commitment fee – a charge of between roughly £237,500 and £712,500 per megawatt. This would be payable when a large data centre accepts a connection offer and refunded on energisation, but forfeited if the project drops out early. The intent is to flush speculative applications out of the queue so that viable, investment-ready projects can move faster. It's a sensible step, but it's a filter on the queue rather than a fix for the underlying shortage of timely access to power. However, it appears that the initial quantum of the proposed fee is far too high and could swing the balance too far the other way.

AI Growth Zones aren’t a ready-made shortcut

The final issue data centre developers face is the design of AI Growth Zones (AIGZs) themselves. Government-backed AIGZs are intended to speed up investment by combining planning support with a clearer policy signal, and potentially location-specific discounts on network charges, some of which could be funded by recycling constraint costs. In principle, that should accelerate projects, although we’re waiting to see how those discounts will help in practice.

In practice, however, these zones still depend on network capacity. Zones are being announced without a clear, industry-wide view of how much demand the grid in those areas can realistically support; the fundamental issue of timely access to power remains.

None of these challenges is insurmountable, and developers are already looking at alternatives to the traditional connection process rather than waiting for reform to catch up.

One option is co-location. Private networks and microgrids can be constructed to pair new data centres with new generation behind a single meter point. This can give generators a direct route to market, while potentially enabling data centre developers to secure power more quickly than through the traditional connection process. The private nature of the network is central to the model, enabling generation to be used within a more localised grid. By reducing reliance on the public grid, data centres may also be able to reduce some of the transmission costs added to their energy bills.

There’s an additional benefit to architecting private networks that make smaller demands on the grid. It’s often easier to secure smaller grid connections, in part because they may not require as much upstream reinforcement work – if any. Suitable connections may also already be available, particularly at brownfield sites. Alongside this, connections can be optimised to reduce their size and designed to ramp up over time to match actual demand, rather than requesting full capacity from day one. Most projects don’t use their full demand from the start, so understanding what that ramp-up looks like and planning accordingly can help bring forward the initial energisation.

Demand connection and transmission reform on the horizon

Reform is on the horizon, and for transmission-level demand connections this will soon likely help. The Connect pillar of Ofgem and the Department for Energy Security and Net Zero’s (DESNZ) connections reform programme is likely to introduce a self-build, own or transfer option for demand customers. This will allow developers to build their own connection assets – with the support of their partners – rather than wait for the incumbent to do it for them, and to choose whether to hand that infrastructure over to a network operator once it's built. Ofgem and DESNZ are also looking at alternative and flexible connection options that may help facilitate the ramp-ups and flexible grid use discussed above.

The reforms may also bring with them the introduction of independent transmission operators (ITOs). At the distribution level, independent distribution network operators (IDNOs) already connect a significant proportion of new homes in England, demonstrating that independent operators can take on network delivery at scale. Ofgem and DESNZ are now seriously considering extending that model to the transmission network, allowing licensed independents to step in and support major projects, including data centres.

Breaking ground with compute

The UK's AI ambitions won't be realised by regulation alone. Reform is coming, but developers can't afford to wait for it. The routes around the queue already exist: private networks, co-located generation, and connections built and owned by independents rather than left in the incumbent's backlog. Get this right and the prize is enormous – investment, jobs and skills that will otherwise go elsewhere.