As data center developers compete for a share of the substantial investments in the artificial intelligence industry, the queue to connect to the UK’s power grid has become congested with projects that may not materialize. This congestion is extending wait times for viable projects and complicating energy demand forecasting and grid expansion planning.
In July, the UK’s energy regulator, Ofgem, proposed measures aimed at reducing the number of speculative data centers in the queue. The proposal, which will be finalized following an industry feedback process ending in September, includes requirements for developers to pay a significant nonrefundable deposit that could reach hundreds of millions of dollars for the largest data centers. Additionally, developers must secure customers in advance and demonstrate adequate funding for their projects.
Ofgem faces a challenge in balancing the need to deter speculative applications while ensuring that legitimate data center projects are not discouraged from pursuing opportunities in the UK, which aims to meet the growing demand for computing power necessary for advanced AI models.
Data center developers are experiencing delays globally; similar issues are reported in the US and across Europe. However, experts suggest that Ofgem’s reforms could make the UK less attractive for data center construction, given the high energy costs and limited land availability.
Alex Burgoyne, head of data centers at real estate consultancy Knight Frank, stated, "The frenzied data center buildout is bringing a huge amount of capital investment into the UK. We don’t want to shoot the golden goose."
Ofgem has acknowledged the importance of data centers in supporting the UK's AI ambitions and economic growth. Nathan Macwhinnie, deputy director of strategic planning and connections at Ofgem, noted, "We recognize data centers are a key part of the UK's AI ambitions and future economic growth. Enabling viable data centers to connect more quickly is an enabler of this."
The queue for the UK grid began expanding significantly in late 2024, coinciding with the government’s designation of data centers as “critical national infrastructure.” Between November 2024 and June 2025, the total energy demand from projects in the connection queue surged from 41 gigawatts to 125 gigawatts, with new data centers accounting for 73 gigawatts of that demand, which is equivalent to one and a half times the peak demand for the entire UK last year.
The government has expressed skepticism regarding the actual demand represented by these projects. Taco Engelaar, managing director at grid optimization company Neara, described the situation as "absolutely insane," indicating uncertainty about the true grid demand due to these speculative projects.
The lengthy queue has been attributed to an incentives issue. Developers face long waits for grid access, and the low cost of joining the queue has encouraged them to apply for power even without concrete plans. This speculative approach complicates the grid operators’ ability to assess the cumulative impact of large infrastructure proposals on network stability.
The UK has mandated that developers demonstrate they have secured land rights and submitted planning applications since 2024 to ensure they are likely to proceed with their projects. The latest Ofgem proposal follows this logic, aiming to reduce speculative applications and facilitate better planning for grid upgrades and expansions.
Concerns remain that the new fees could deter data center developers, particularly smaller firms that may struggle to meet the financial requirements. Daniel Newton, a partner at the law firm Slaughter and May, emphasized the difficulty in setting fees that effectively balance deterrence of speculation while not discouraging viable projects.
While the reforms may not immediately enhance the UK’s prospects in the AI infrastructure investment landscape, some experts believe that removing phantom data centers from the queue could improve the long-term outlook for the sector. Olivier Darmouni stated, "It’s about shaping the next five years to make sure you build the data centers in the right place, at the right size, with the right power supply. It’s not going to be a gas pedal you can press on, and the car is going to accelerate immediately."