Ofgem has published a consultation setting out proposed reforms to the way data centres obtain and retain electricity grid connections in Great Britain. The proposals form part of Ofgem's wider programme to address growing pressures on the connections queue and are intended to discourage speculative projects while ensuring that viable developments can progress more efficiently through the connection process.
The consultation focuses on the introduction of a substantial upfront commitment fee and a series of new project milestones that data centre developers would be required to meet in order to maintain their place in the queue.
The consultation is open until 16 September 2026, with Ofgem expected to publish its decision on the proposals later this year. In this article we cover the key reforms which, if implemented, could have significant financial and operational implications for both existing and future data centre developments across the UK.
Ofgem's proposals are a response to the significant increase in demand for grid connections from data centre projects. The regulator is concerned that some projects in the connections queue may be speculative or unlikely to proceed, potentially preventing viable developments from securing timely access to network capacity.
The proposed reforms are therefore intended to identify and prioritise deliverable projects by requiring developers to demonstrate ongoing progress and commitment to their schemes.
Ofgem is proposing the introduction of a significant upfront commitment fee for larger data centre projects seeking grid connections. The proposed fee is expected to range between £237,500 and £712,500 per MW of contracted capacity and would be payable in addition to existing security requirements.
The fee would need to be secured when a connection offer is accepted and maintained until energisation. Where a project is terminated, abandoned or fails to satisfy key contractual milestones, the commitment fee could be forfeited in full.
Ofgem is also proposing a series of data centre-specific milestones designed to demonstrate that a project is progressing towards delivery. Developers would be required to provide evidence at various stages of development, including:
anticipated customer demand or intended self-use;
commitments to procure long-lead equipment;
financial and technical capability to deliver the project; and
in certain cases, binding offtake arrangements.
Failure to satisfy the relevant milestones could result in the termination of the project's connection agreement and, where applicable, the loss of the commitment fee.
The proposals would materially increase the cost of securing a grid connection. For larger projects, the required security could be substantial and would likely be payable before a final investment decision is made.
Whilst well-capitalised developers may be able to absorb the additional security requirements, it could prove more challenging for smaller developers and SPV-led projects.
The level of the proposed commitment fee is likely to attract significant scrutiny, particularly given its potential impact on projects that are progressing legitimately rather than occupying queue positions speculatively.
Additionally, a key issue for consultees is likely to be the extent to which developers will be protected where delays arise from factors outside their control, including planning delays, network reinforcement works, equipment shortages or wider supply chain constraints.
A further area of concern is that the proposals could apply not only to new connection applications but also, to a degree, retrospectively to existing projects that have already received or accepted connection offers. Although Ofgem proposes certain exemptions and grace periods for projects that are close to energisation or are already progressing through the connection process, affected developers may nevertheless face new security requirements and additional costs that were not anticipated when their connection arrangements were originally agreed.
For the data centre sector, there may be concerns that the additional financial burden could affect investment decisions at a time when the Government is seeking to encourage growth in AI and digital infrastructure. Whether the proposals align with those wider policy objectives is therefore likely to form part of the consultation debate.
The consultation closes on 16 September 2026, providing developers, operators and investors with an opportunity to comment on the proposals before any changes are finalised.
Whilst there is broad support for reform of the connections queue, developers, investors and operators involved in data centre projects should closely monitor the consultation and assess the potential impact on existing and planned developments. If implemented, the reforms could fundamentally reshape how data centre projects secure and retain grid capacity, increasing the importance of early-stage project readiness, funding certainty and programme management.
For more information, contact our energy and resource management team.
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