Ofgem datacenter fee targets speculative UK grid requests
Ofgem is consulting on a refundable fee for large datacenter grid applications as AI demand strains the UK connection queue.
By Renata Fuchs · Policy Reporter
· 3 min read
The Ofgem datacenter fee proposal would make large server farm developers put money down when they accept a UK grid connection offer, a move aimed at clearing speculative projects from an overloaded power queue. The electricity and gas regulator said applications for electrical supply have jumped from 41 gigawatts to 125 gigawatts in less than a year, with datacenters responsible for at least 80 gigawatts of that new demand.
Ofgem is seeking feedback on a Datacenter Commitment Fee that would be paid by developers of large datacenter projects. The regulator’s premise is straightforward: developers that are serious about building should be able to back their application, while projects used mainly to reserve optionality should carry a cost.
The queue problem is already affecting delivery schedules. Before the latest surge, one major UK developer said its construction teams were facing waits of “a number of years” for grid work such as local substation upgrades needed to add capacity.
What is the Ofgem datacenter fee?
The proposed fee would be charged when a developer accepts a grid connection offer for a large datacenter project. Ofgem says the money would be returned once the facility begins taking power, but forfeited if the project leaves the queue early.
Ofgem has suggested a range of £237,500 to £712,500 per megawatt, equivalent to about $319,000 to $957,000 per megawatt. The regulator said that would represent about 2.5% to 7.5% of average project costs.
Developers may also have to show continuing progress to keep their place in the queue. Ofgem’s proposed criteria include financial capability, commercial maturity and procurement activity milestones. Those tests are meant to separate active projects from applications filed across multiple possible sites before a final campus location is selected.
Eleanor Warburton, Ofgem’s director for Energy System Design and Development, said Britain’s electricity demand connections queue has more than tripled in under a year and that consumers should not carry the risks created by speculative projects occupying capacity in the system.
Why datacenter developers are filling the queue
Alan Howard, principal analyst for Colocation and DC Building at Omdia, has described the practice as a wider industry issue, including in the US. He said many operators secure rights across several land parcels, apply for grid load connections for each site and then build where approvals arrive, leaving the energy sector exposed if the requested demand does not become real projects.
Telehouse, which operates five datacenters around London, supports efforts to put credible projects ahead of weaker applications, but warned that the design of the fee matters. Mark Pestridge, managing director of Telehouse Europe, said a refundable fee should not discourage serious investors and should make the connection process more transparent for viable projects.
Pestridge also said queue reform will not solve the larger capacity problem. Telehouse said the UK still needs sustained grid investment and earlier coordination among datacenter operators, councils, National Grid and network operators so that power infrastructure is built where projects can actually proceed.
The proposal lands against the government’s push to expand AI infrastructure, including AI Growth Zones with faster planning processes for datacenters. The government has also set up an AI Energy Council involving energy industry representatives and major technology companies to work on the power bottleneck.
Ofgem’s consultation is open to interested parties and closes on September 16, 2026. The regulator has made response templates available on its website.
This story draws on original reporting from The Register.
