British energy regulator Ofgem has proposed requiring data centre developers to pay hundreds of millions of pounds in refundable deposits before connecting to the electricity grid, as the artificial intelligence boom drives unprecedented demand for power.
The regulator said the amount of electricity capacity being requested by projects seeking grid connections has surged from 41 gigawatts to 125 gigawatts in the past year, more than double Britain’s peak electricity demand of around 46 gigawatts in 2025. The proposal targets what Ofgem calls ‘speculative projects from securing scarce network capacity without any firm intention to connect.’
Under the plan, developers would pay a refundable deposit of between 237,500 and 712,500 pounds per megawatt. A data centre seeking one gigawatt of power — a common scale for new AI-focused facilities — would face upfront costs in the hundreds of millions, though the deposit would be returned if the project is completed.
‘Britain’s electricity demand connections queue has more than tripled in size in less than a year, and consumers should not bear the risks created by speculative projects taking up space in the system,’ said Eleanor Warburton, Ofgem’s director for energy system design and development.
The consultation, open until September 16, also proposes requiring projects to hit key milestones to keep their place in the grid connection queue. There are currently 564 data centres listed in the UK, with Scotland emerging as a prime location for future projects due to its supply of renewable energy. Twenty-four data centres are currently in the planning process in Scotland alone.
Data centres are large buildings housing thousands of computer servers that store and process data for digital services and AI workloads. They have become increasingly controversial among residents near proposed sites, who raise concerns about noise, electricity demand, and the large amounts of water sometimes used to cool high-performance chips.
The proposal follows growing opposition to data centre developments across Britain. Energy Minister Michael Shanks said Ofgem’s actions would ‘help ensure that viable connection-ready projects can get going and not be held up by speculative applications.’ He added that ‘Britain needs a grid connections system that works for the 21st century and allows businesses to invest and grow.’
The deposit plan is the latest sign of tension between the rapid growth of AI infrastructure and the capacity of national power grids. Similar debates are playing out in Ireland, the Netherlands, and parts of the United States, where data centre power demands are straining grid capacity and driving up electricity costs for households.
Author: Pulse Of Nations Wire Desk
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