Ofgem Proposes Data Centre Connection Levy as UK Grid Queue Triples to 125GW
A proposed commitment fee of £237,500–£712,500 per megawatt would reach tens of millions for the largest data centre applicants, targeting a connection queue that tripled in seven months.
Britain's energy regulator proposed on Wednesday (2026-07-29) that data centre developers pay upfront fees of between £237,500 and £712,500 per megawatt before securing electricity grid connection slots. Ofgem said the charge is designed to clear speculative applications, reserving network capacity for developers with credible build plans. Energy Voice reported that for the largest applicants the fees would run to tens of millions of pounds.4,3
Contracted demand connection offers surged from 41GW to 125GW between November 2024 and June 2025, Ofgem said, a near-tripling in seven months driven overwhelmingly by data centre applications. Projects with firmer plans, including battery storage and renewable generation, have been forced to queue behind applicants that may never build. Energy Voice described the proposals as a "crackdown" on "unviable" data centres.3
The proposed fee range is set as a share of average development costs. At £712,500 per MW, the charge equals roughly 7.5% of typical project costs; the lower bound of £237,500 per MW represents about 2.5%, Ofgem said. Calibrating the fee to project cost rather than imposing a flat levy means the upfront commitment scales proportionally with each capacity reservation, in theory making large speculative holds disproportionately expensive.4,3
This consultation sits alongside Ofgem's own grid investment commitment. The regulator approved a £24 billion programme last year covering gas distribution maintenance and electricity network expansion to accommodate more renewables, oilprice.com reported. The commitment fee is framed in Ofgem's consultation documents as part of broader reforms to ensure that expanded network capacity flows to projects with firm build timetables, Energy Voice reported.4,3
Grid security concerns give the issue practical urgency beyond network planning. A nationwide blackout in early August 2026, triggered by a lightning strike followed by two successive plant failures, cut power to around 1.1 million customers, according to NGESO's final technical report. Approximately 475MW of operational battery storage capacity was called upon to restore grid frequency within four minutes of the event, energy-storage.news reported. NGESO subsequently raised in its final report whether the system requires additional reserve capacity.1
The UK power sector has estimated the annual cost of procuring that additional reserve at between £50 million and £250 million, energy-storage.news reported. Battery storage operators had been watching the post-blackout reserve review for new revenue opportunities. Ofgem's commitment fee targets data centre applicants directly, but the connection queue they dominate is the same one storage projects must enter; clearing it of speculative data centre entries could in theory accelerate connection timelines for battery developers.1,3
Other European regulators have been moving similarly. Romania's Anre tightened grid queue rules on Tuesday (2026-05-26), lifting the required deposit for renewables and storage developers from 5% to 20% of connection tariffs, Montel reported. The UK's proposed fee involves substantially larger absolute sums per megawatt, but both approaches target the same dynamic: connection capacity held for years by applicants with no genuine development intent.2
Ofgem's consultation, launched on Wednesday (2026-07-29), remains open for industry submissions, and the regulator has not indicated where within the proposed band it intends to set the final fee. A charge calibrated toward the lower end may prove insufficient to deter large hyperscalers that can absorb 2.5% of project costs without altering pipeline decisions. One set toward the upper end risks deterring battery storage projects the grid called on during last August's blackout — the same flexible capacity the £24 billion network expansion was partly designed to support.3,4,1