Executive Summary
- Ofgem’s curate reforms could have significant consequences for the UK’s data centre developers.
- Neil Harris, Grid Connections Director at Last Mile, explores the effects and what developers should do about them.
- Here, he suggests that what the market now needs is a clear timeline, so the industry can plan with confidence rather than preparing for multiple possible scenarios.
The queue to connect demand projects to the UK’s national electricity grid has ballooned, and the numbers highlight the urgency of action. In July Ofgem announced that connection applications in the queue more than tripled from 41GW to 125GW between November 2024 and June 2025. It attributes roughly 80GW of that to data centres alone, and subsequent demand continues to grow exponentially.
Compare this to GB’s electricity peak today, which tops out at around 45GW in the cold of winter: there is three times more demand in the queue than the network can currently accommodate.
Much of the problem is that not all of the queue is real. A large share of projects are speculative applications that may not be viable – much as we saw a year or so back on the supply side.
As Ofgem and the wider industry recognise, this distorts investment signals, delays genuine projects from being able to get connected, and clogs up a system that is already struggling with 10-year-plus transmission reinforcement timelines.
Ofgem’s response to this issue is building on its reforms to supply connections, which have already replaced the ‘first come, first served’ queue with a ‘first ready, first connected’ one.
While these reforms have also introduced new evidence and viability obligations for demand customers, the regulator has understandably deemed them insufficient compared to the size of the problem at hand.
Ofgem has responded with a demand connections reform programme comprising three pillars of work. The ‘curate’ pillar is focused on managing and cleaning up the connections queue, and proposes two key mechanisms: a data centre commitment fee and data centre queue management milestones – which are crucial for developers to understand and plan for today.
What’s in the pipeline – and what that means for developers
Measures to improve queue quality, release capacity from non-viable projects and improve confidence in network planning and investment decisions are vital. However, there are concerns about the consequences the curate proposals could inadvertently introduce.
Chief among them is the risk of outsized impacts on smaller and mid-sized data centre projects. The commitment fee proposal is set to kick in at 40MW, and will be calibrated to between 2.5-7.5% of average data centre capex, or roughly £237,500–£712,500 per MW. Developers must post this security on acceptance of a connection offer, and it’ll be held and returned once a project is energised.
Projects failing to progress forfeit their fee.
For a 100MW hyperscale development, that risks exposure to the tune of £24m–£71m, which is clearly significant even for extremely well capitalised projects. But smaller and mid-tier developers can’t absorb such large upfront securities so easily. To avoid any unintended consequences, the structures and timings of the fees must be carefully calibrated – and the existing transmission connection securities reform is a sensible template to align with.
Alongside the fees are additional milestones. These will require developers to provide evidence of credible off-takers, financial capability, technical design maturity and procurement of long-lead electrical equipment such as transformers and switchgear.
Where possible, Ofgem should look to minimise unnecessary administrative burdens to avoid damaging growth and investment in the sector. However, measures along these lines may be the most effective tools available to distinguish viable projects from speculative ones.
They provide proof, beyond simply looking at available finance, that projects are likely to earn their place in the queue. In turn, they’ll help deliver targeted changes to the UK’s queue that will accelerate connections for viable data centres.
What can developers do today?
Consultation on these reforms closed in September. Because Ofgem intends to streamline its implementation once the decision has been published, there’s a real possibility that the reforms will impact developers as early as the first part of 2027.
Given this timeline, developers shouldn’t wait for the final rules to land before acting. The most valuable thing to do today is engage with a connections partner early enough to shape a project with the reforms in mind, rather than reacting to them and paying the price once they’re in force.
Asset value payments and commercial terms can all be structured around what a data centre project needs, which matters more than ever given the new commitment fees sitting alongside every other capital commitment a developer must make.
Where the standard grid connection model can create drag, it’s worth asking whether to follow that convention at all. Co-location, private networks, and phased connections can all help reduce the scale and cost of the required connection, and get developers connected faster than conventional designs would allow.
Looking ahead
Ofgem’s demand reforms look likely to move the market in the right direction. The regulator is right to want a cleaner, more credible queue, and the industry as a whole will benefit when that ambition starts to bear fruit. What the market now needs is a clear timeline from Ofgem on next steps, so developers can plan with confidence rather than preparing for multiple possible scenarios.
Ultimately, successful reform will mean accelerated connections for viable data centres and other large demand projects including housing, transport hubs and commercial developments. When data centres are easier to build and connect, the UK can compete in the fast-evolving AI future – rather than watching development head elsewhere.
