Summary
- Ofgem proposes a commitment fee of £237,500 to £712,500 per MW for large data centre connection offers.
- The fee would be refunded at energisation but could be forfeited when a project withdraws or fails to progress.
- Developers would also need evidence of finance, commercial maturity, end-user demand, and long-lead electrical procurement.
Ofgem has proposed a refundable commitment fee of between £237,500 and £712,500 per megawatt for large data centre connections, alongside new milestones intended to remove speculative projects from Britain’s electricity queue.
The fee would become payable when a developer accepts a connection offer and remain secured until the project is ready to connect. It would be returned at energisation but could be forfeited if the development withdraws early or fails to meet the required progression tests.
At the upper end of the range, a 100MW project could be required to secure £71.25 million. Ofgem estimates that the proposed fee represents approximately 2.5% to 7.5% of average project cost, making it a substantial development-finance obligation rather than an administrative charge.
The queue contains far more demand than the grid can plan around
Contracted demand offers increased from 41GW to 125GW between November 2024 and June 2025. Ofgem says data centres account for at least 80GW of the total, although different datasets and project definitions produce varying estimates.
A large share of that capacity may never be built. Projects can enter the queue before developers have secured occupiers, financing, planning permission, land rights, or long-lead electrical equipment, leaving network companies with a mixture of mature developments, strategic options, duplicated applications, and schemes whose commercial assumptions have changed.
Connection capacity held by projects that do not progress can delay viable developments and distort the forecasts used to plan substations, transmission lines, and generation. Removing inactive demand would not create new infrastructure, but it could allow existing and planned capacity to be allocated more accurately.
Ofgem’s milestones would require evidence of financial capability, commercial maturity, a credible end user, and procurement activity. Orders for transformers, switchgear, protection systems, and other long-lead equipment could become part of the proof that a project is moving towards construction.
That requirement would move capital commitments earlier in the development cycle. Major electrical equipment can require large deposits years before energisation, when planning, network design, financing, and customer demand may still be exposed to change.
The regulator has opened a consultation on the reforms, with responses due by 16 September 2026.
Large campuses could carry nine-figure commitments
A developer pursuing several large sites could be required to secure hundreds of millions of pounds before knowing which projects will reach construction. Established hyperscalers and strongly capitalised infrastructure groups may find the requirement easier to absorb than smaller developers or businesses whose model begins with land and grid access.
Joint ventures will need to determine which partner supplies the security, how the obligation is treated in project accounts, and who carries the loss when a scheme is withdrawn. Lenders must decide whether the fee forms part of development equity, restricted cash, or the eventual project-finance package.
Milestone drafting will determine how much risk remains outside the developer’s control. A project could progress commercially while being delayed by planning decisions, network changes, equipment manufacturing, or third-party land rights, raising questions over when forfeiture would be justified.
The treatment of phased campuses will also require care. A development may have a long-term power envelope of several hundred megawatts while only its first building has secured a customer and construction finance. Applying a fee to the entire ultimate capacity could favour smaller applications or encourage developers to divide sites into separate phases.
Ofgem says wider connection reform has already accelerated around 7.8GW of projects by an average of six years. A more credible demand queue could produce additional gains by allowing network planners to concentrate on loads supported by finance, customers, procurement, and realistic delivery programmes.
Physical constraints will remain after inactive applications are removed. Substations, lines, transformers, and switchgear still need planning consent, manufacturing slots, civil works, and commissioning, while the distribution and transmission networks must accommodate other industrial and residential demand.
The proposal would create a distinct regime for data centres because of the sector’s scale and rapid growth within the demand queue. The final framework will need to distinguish speculative capacity from projects whose long development periods reflect genuine planning and infrastructure constraints.
Grid access is consequently moving away from a low-cost development option and towards a financially secured commitment. Developers unable to support their requested capacity with capital, customers, procurement, and a credible programme would face pressure to reduce the application or leave the queue.
