Grid reform must work for long term digital infrastructure
Delivering the UK’s digital infrastructure depends on an effective grid connections system, and Ofgem’s proposed reforms are a welcome step in the right direction, prioritising viable and deliverable projects which chime with the “First ready and needed, first connected” principles.
For too long, speculative applications have made the system harder to plan and slower to deliver. A better connections queue should help the grid work more effectively for investment across digital infrastructure and other growth sectors, while also helping tackle the very significant challenge of decarbonisation.
But as the system is reformed, it is important that the framework distinguishes between speculative applications and credible, long-term digital infrastructure projects and reflects the realities of how these projects are developed.
That is particularly important as Ofgem proposes new milestones for data centres over 10MW, intended to provide greater assurance that projects in the queue are credible and capable of delivery.
The objective is right. However, the way these tests are applied needs to reflect the realities of how large-scale digital infrastructure is developed.
Where energisation may still be several years away, requiring evidence of customer engagement at an early stage is unrealistic. Customers typically need greater certainty over when power will be available before they are willing to commit meaningfully to a project.
This is especially relevant for data centre estates and campuses which are typically developed in phases involving multiple buildings and customers, with significant investment taking place over several years. While the overall development and its long-term requirement for power may be clear from the outset, the precise timing of individual buildings, customer requirements, procurement and construction will evolve as the estate is built out.
The absence of firm customer commitments at an early stage should be considered in the wider context of a project’s overall credibility and readiness.
A credible development can have a clear investment case, strong demand, an experienced developer and a defined plan for bringing capacity forward, while individual customers and phases are still being secured.
The assessment should therefore take account of the full picture, including land control, planning, experience, portfolio track record, design, procurement, funding and delivery capability. These factors can provide important evidence of project specific readiness and credibility alongside customer engagement.
The same principle applies to the proposed commitment fee. Requiring developers to have “skin in the game” is understandable and a fee that is refundable on energisation can provide a meaningful incentive to progress.
But the level of financial exposure also needs to reflect the characteristics of large, phased developments, particularly where capacity is brought forward progressively over several years.
At 2.5%, the proposed fee would amount to £23.8 million for a 100MW project, which is already a significant commitment.
We would advocate capping overall exposure and releasing the security progressively as milestones are achieved and individual phases are energised, rather than requiring developers to tie up the full amount for the duration of a long-term development.
There is also a case for recognising the characteristics of estates and campuses, rather than assessing an entire long-term development as if it were a single project. A dedicated Estate or Campus Development Pathway would allow capacity to be released progressively as individual phases are delivered.
Queue reform is only part of the answer. The debate also needs to move beyond who gets a place in the queue to how quickly those projects can actually be connected and energised.
If developers are being asked to demonstrate commitment, capability and financial backing, they should also benefit from a clearer and more accelerated route to connection.
Indeed, if developers are expected to have "skin in the game" through a significant commitment fee, network operators should be expected to commit to clear delivery obligations. Applicants should not be required to commit substantial capital only to face repeated connection delays without recourse, accountability or a mechanism to challenge performance. A balanced framework should link customer commitments with equivalent obligations on those responsible for delivering the infrastructure.
At Slough Trading Estate, one of Europe’s most important data centre clusters, we can already see the size of the opportunity. Alongside our wider data centre pipeline in London, the demand, investment capital, development-ready sites and customer interest are already there. The critical constraint is power and the infrastructure required to deliver it.
The UK has a significant opportunity to attract investment in AI, digital infrastructure and wider inward investment. Realising that opportunity depends not only on improving the quality of the connections queue, but on connecting credible projects quickly enough to match investment decisions being made today.
Queue reform is welcome but should identify and prioritise projects that are genuinely progressing, not simply those with the deepest pockets. As a company, we support stronger milestones, better evidence requirements, and removal of speculative projects in favour of a framework that gives precedence to credible readiness testing, proportional financial commitments and reciprocal accountability from all parties which supports the investment Britain needs to build the next generation of digital infrastructure.