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A 100-megawatt data centre campus in Britain now needs up to £71 million in cash before a single foundation goes in. The money is then locked in the grid connection queue and is refundable only if the project actually gets built.

Ofgem opened a consultation on July 29 for a Data Centre Commitment Fee: a charge of £237,500 to £712,500 per megawatt, payable the moment a developer accepts a grid connection offer, refunded at energization, and forfeited if the developer walks away early. Ofgem frames this as roughly 2.5 to 7.5 percent of average project costs. Applied to real schemes, the tiers look like this:

Eleanor Warburton, Ofgem’s Director for Energy System Design and Development, put the logic plainly:

Demand-connection applications in Great Britain rose from 41 gigawatts to 125 gigawatts in under a year, and data centers account for at least 80 gigawatts of that increase. Britain’s entire peak electricity demand runs around 45 gigawatts, so the queue is now claiming roughly triple of what the grid delivers at its peak. Ofgem's own diagnosis is that a large share of that demand is speculative. Developers file multiple applications across sites to hedge their options, then abandon most of them once one location proves viable. 

Alan Howard, an Omdia analyst who covers colocation and data center construction, described the underlying pattern to The Register before the fee was proposed. Developers request grid connections at multiple sites and build wherever gets approved first. “The capital investment to take all these projects seriously is clearly untenable,” he said.

Ofgem is pairing the fee with three new milestones for projects that want to hold their place:

New York and Texas both restricted data center grid access within a month of each other, using very different tools, which shows this pressure isn’t confined to Britain.

New York went first. Governor Kathy Hochul signed Executive Order 62 on July 14, pausing environmental permits for data centers above 50 megawatts for up to a year while the state builds a cost-allocation framework. Hochul tied the pause directly to rising utility bills and strained natural resources, framing the delay as a responsibility she couldn’t put off.

Texas followed on August 3. Governor Greg Abbott ordered the Public Utility Commission and ERCOT to audit every data center seeking a grid connection, covering more than 1,800 projects representing over 474 gigawatts, roughly five times the state’s peak demand record.

ERCOT paused an existing review process called batch zero to make room for it, and general counsel Chad Seely said the change moved verification ahead of the interconnection study process rather than somewhere partway through it.

Agriculture Commissioner Sid Miller dismissed the order as “all hat and no cattle,” arguing it fell short of real legislative action. State Rep. Gina Hinojosa said the pause could amount to as little as a single day and accused Abbott of talking tough after years of enabling the state’s rapid buildout.

The Data Center Coalition took the friendlier view that a proper audit could separate responsible operators from irresponsible ones, while Environment Texas welcomed the scrutiny but pushed for stronger protections on water and air quality alongside it.

These three governments didn’t coordinate, yet they landed on the same diagnosis: ratepayers have been absorbing the cost of holding grid capacity for projects with no firm intention to connect, and each regulator has decided the queue itself needs to do the filtering that developers used to do for themselves.

techUK, which represents UK tech firms and has spent months working with Ofgem on the reform package, backs the milestones but flagged the fee level directly, calling it a significant area of concern that risks making the UK a less attractive destination for data centre investment.

Telehouse, which operates five London-area data centers, struck a similar note. Managing director Mark Pestridge told The Register that "a refundable fee-based approach should not deter serious investors," but argued the real fix is sustained grid investment and closer coordination between operators, councils, and network operators from the earliest planning stages, since pricing the queue doesn't expand it.

For contractors and engineers with data center work on the books, the practical effect is a much harder pre-construction filter:

Wood Mackenzie analyst Ben Hertz-Shargel made a related point about the US grid last year that applies just as well here. Utilities often lack both the grid capacity and the generating capacity to keep pace with data center demand. Expect the client base for live data center projects to consolidate toward a narrower group of well-capitalized operators, even as the number of announced schemes keeps climbing.

The gap between what gets announced and what gets built is already wide across the sector this year, as our funding roundup coverage has tracked, and this fee should widen it further.

Ofgem’s consultation closes September 16, and neither the exact fee level nor the 40-megawatt threshold is locked in. What is locked in is the direction: Britain, Texas, and New York are converging on the same conclusion from different starting points, treating power access as the binding constraint on data center construction ahead of capital, planning approval, or even chip supply. We have tracked this shift for months.

Data center developers are building their own power plants to bypass multi-year wait times. A widening gap has opened between announced and delivered capacity across the sector. Europe has shown its own hesitation about the scale of buildout it’s being asked to host. Ofgem’s fee is the most direct pricing mechanism any major jurisdiction has proposed so far, and it won’t be the last.

On the fee itself: A 100-megawatt UK data center project now faces up to £71.25 million in refundable capital at risk before construction starts. Ofgem calibrated the fee deliberately to filter out developers without genuine intent to build.

On the queue: Britain’s grid connection queue tripled from 41 gigawatts to 125 gigawatts in under a year, with data centers responsible for the large majority of that growth, most of which Ofgem believes will never materialize.

On the global pattern: Texas and New York both restricted data center grid access within weeks of Ofgem’s consultation, using different mechanisms but the same underlying diagnosis: power access is now a constraint regulators actively manage.

On industry pushback: Even trade bodies broadly supportive of reform, like techUK and Telehouse, are warning that the fee level could push investment elsewhere if Ofgem gets the calibration wrong.

On who wins: Well-capitalized developers with committed offtaker demand and clean procurement evidence clear the new milestones. Speculative filers and thinly capitalized schemes don’t, and contractors should weigh their pipeline accordingly.

For the last two years, the data center industry has treated grid connection applications as a formality, filed early with the details worked out afterward. Three major jurisdictions have now decided that assumption itself was the problem. Firms evaluating data centre opportunities purely on announced capacity and headline investment figures need a second filter. They should ask whether the developer behind the announcement can actually afford to hold their place in line.

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