Ofgem has announced plans to curb speculative AI data centre projects that are clogging up Britain’s electricity grid, after applications for new power connections more than tripled in less than a year.

The energy regulator is consulting on a new upfront commitment fee for large data centre developers, alongside stricter rules requiring projects to prove they are financially and commercially ready before securing scarce grid capacity.

The proposals follow a surge in demand for electricity connections, which rose from 41GW to 125GW between November 2024 and June 2025.

Data centres account for at least 73GW of that pipeline across 315 projects, raising concerns that speculative schemes are blocking viable developments from connecting.

Under the plan, developers would pay a refundable fee of between £237,500 and £712,500 per MW when accepting a connection offer.

The money would be returned once a project is energised, but would be forfeited if developers abandoned their place in the queue.

Ofgem said the reforms are intended to ensure grid capacity is allocated to projects that are ready to build, while also improving confidence in future network planning, as the queue for connections has become a bottleneck for sectors trying to add power-hungry infrastructure.

AI boom strains the grid

The consultation comes amid a sharp rise in UK data centre development as companies race to build AI infrastructure.

A City AM analysis earlier this year found that more than 60 planning applications for new data centres were submitted across England and Wales in 2025, up 63 per cent from the previous year, as investors moved to capitalise on surging demand for AI computing power.

Speaking to City AM at the time, Pure Data Centres chief executive Dame Dawn Childs warned that the boom had also attracted speculative developers hoping to profit from rising land values.

“Everyone’s trying to get a piece of the pie,” she said, adding that many sites were being marketed as future AI campuses despite lacking the fundamentals needed to become operational.

The regulator’s intervention also comes as questions grow over the impact of data centres on Britain’s electricity network.

Government emissions forecasts for AI data centres were revised up by around 100-fold earlier this month after officials acknowledged they had significantly underestimated the sector’s future energy demand.

London’s data centres already consume more electricity than all of the capital’s households combined, while UK data centres now account for around six per cent of national electricity demand.

At the same time, communities hosting clusters of data centres have begun pushing back against further expansion.

Residents around Slough Trading Estate, Europe’s largest data centre hub, have raised concerns about constant noise, heat and the concentration of new developments, while campaigners have called for tighter scrutiny of future projects.

Ofgem director for energy system design and development Eleanor Warburton said 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,” she said.

The consultation closes on 16 September and forms part of wider reforms by Ofgem, the National Energy System Operator and the government to speed up grid connections for investment-ready projects.

London Stock Exchange news article

City AM: Data centre planning applications rocketed more than 60 per cent in 2025