Ofgem Proposes Hundreds of Millions in Upfront Fees for Data Centre Developers

Ofgem has proposed new measures which could see developers of data centres made to pay hundreds of millions of pounds up front. The British energy regulator said a refundable fee should be charged for projects that want to connect to the network, amid mounting demand for connections to the electricity grid. It is proposing developers pay a deposit between £237,500 to £712,500 per megawatt - meaning data centres seeking 1 gigawatt (GW) of power would have to pay hundreds of millions up front, paid back if the project was completed. The proposal follows growing opposition in parts of the country to plans for new data centres, which are needed to power the artificial intelligence boom. Data centres are large buildings which house computer servers used to store and process data and run the digital services which power the internet. Ofgem has started a consultation on its proposals, which will run until 16 September. It said the amount of electricity capacity being requested by projects seeking to connect to the grid had risen from 41 GW to 125 GW in the past year, reflecting a sharp increase in demand. This is significantly more than double 2025's peak electricity demand in Britain of around 46 GW. The regulator said the projects would have to hit key milestones to keep their place in the grid connection queue, which has seen a surge in demand. An increasing number of centres have been built around the world in recent years to provide the computing power needed to train and run AI systems. But they are controversial, especially for people who live near them. Residents have raised concerns about noise, electricity demand and the large amounts of water sometimes used to cool the high-performance chips that generate vast amounts of heat.