The United Kingdom (UK) is one of the world's largest data centre markets, with facilities housing IT infrastructure needed to process, store and share data across various sectors, including Artificial Intelligence (AI), cloud computing and financial services. The number, size and strategic importance of UK data centres is expected to continue to grow as AI adoption increases.
Greater London is already an established hub for data centres, and the government has indicated plans to promote AI Growth Zones – hubs bringing together AI infrastructure, from processing power to research expertise – across the UK. Potential sites have been identified in Oxfordshire, the Northeast and North Wales. These zones are expected to benefit from policies designed to accelerate grid connections, reduce energy costs and streamline planning approvals.
Data centre grid connections
Data centres consume huge quantities of electricity, making timely grid access critical to market growth. Grid availability affects data centres in two ways:
- connecting the data centre itself to draw power; and
- connecting new generation to ensure sufficient electricity supply.
In Great Britain (GB), many data centres have faced long delays securing connections, as the network has struggled with rising demand. Ofgem and the National Energy System Operator (NESO) have introduced and continue to refine connection reforms to mitigate these delays.
Previously, a “first to contract, first to connect” system led to long queues, often lasting several years. Under a new system approved by Ofgem in 2025 and known as TM04+, existing and new applications are re-ordered to prioritise projects considered “ready and needed.” NESO has published an updated delivery pipeline reflecting this.
A new connections process
Under TM04+, transmission connections follow a two-stage process. At Gate 1, developers are assigned a queue position. A connection offer with a specific date is available at Gate 2, once the Gate 2 Criteria – readiness and strategic alignment – are met.
Transmission-connected demand projects, including data centres, are deemed to meet the strategic alignment test.
To demonstrate readiness, developers must secure required land rights, either through a freehold or leasehold of at least 20 years (or an option), or for projects using compulsory acquisition (e.g., Nationally Significant Infrastructure Projects), planning consent from the relevant authority. This may be challenging for data centres, which often acquire land later than generation projects. The land area is assessed using proposed Energy Density Thresholds (MW/hectare) to discourage over-application of capacity and encourage energy-dense solutions.
Options being considered by Ofgem for demand connection applications
In response to a surge in demand-side applications, many from data centres, Ofgem has published a Call for Input to understand the demand queue composition and identify ways to prioritise viable projects. Ofgem is considering adapting elements of TM04+ for demand projects and introducing additional demand-specific requirements.
Improving data availability
Ofgem is exploring ways to strengthen data sharing and improve the quality and consistency of information from applicants.
Progression commitment fee (PCF)
Ofgem may extend the PCF, currently applicable to generation from January 2026, to demand projects. The PCF discourages speculative queue positions and incentivises early exit of non-viable projects.
The PCF triggers when around 5% of projects in Gate 2 fail User Progression Milestone 1 (UPM1) – initiating planning and consents. If triggered, developers receive three months’ notice to withdraw before posting PCF security. The fee starts at £2,500/MW, rising by £2,500/MW every six months to £10,000/MW. Projects leaving the queue before UPM1 avoid the fee, promoting meaningful progress or early exit.
Securities for transmission works
Ofgem is considering aligning demand security requirements with generation. Currently, demand projects must post security for 100% of required transmission works, whereas generation projects post proportionate amounts that reduce with milestones. Previously, demand connections rarely required wider network reinforcement, but now large projects, including data centres, often do. The 100% requirement may make otherwise viable projects financially challenging.
Other options
Ofgem is exploring options for greater ownership or operation of high-voltage transmission assets by data centres and the use of non-firm, ramped, or self-supply connections. Stepped or ramped connections suit modular build-out strategies. Additional criteria may be considered to distinguish “ready and needed” projects from speculative ones, including investment commitments, signed contracts, lower-constraint site locations and flexible demand solutions. These must reflect technology-specific constraints.
Prioritising AI growth zones
For strategic projects like AI Growth Zones, the government is exploring measures to accelerate grid connections, including prioritisation in the queue and enabling developers to deliver high-voltage infrastructure.
New mechanisms to prioritise strategic projects
Speculative demand in the queue will be removed and new mechanisms will be introduced:
- a reallocation mechanism, giving priority access to freed-up capacity when projects exit the queue; and
- a reservation mechanism, allowing capacity to be reserved at specific connection points for strategically important projects.
Self-build
Data centre developers may be allowed to construct and connect their own high voltage lines and substations to power their sites, rather than waiting for network operators. Under a “build and transfer” model, developers would build and then hand over operations to the network operator; or under a “build and operate” model developers retain ownership.
Connections accelerator service
Strategically important projects will benefit from a bespoke Connections Accelerator Service which will offer enhanced engineering support and help with reducing connection delays.
Distribution-connected demand
Projects connecting to the distribution system continue to apply to the local DNO, as TM04+ applies only to transmission. Ofgem expects DNOs to align processes with transmission and request evidence of project maturity.
Centralised strategic energy planning
The government is taking a centralised strategic approach. Regional Energy Strategic Plans, being developed by NESO, will guide distribution network investment and align with:
- Strategic Spatial Energy Plan (generation and storage);
- Future Energy Pathways (future demand and supply); and
- Centralised Strategic Network Plan (transmission and wider network needs).
Next steps
GB's legislative and regulatory developments will influence how data centres connect to the electricity network.
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