UK: Unlocking the queue? Ofgem’s proposed reforms for data centre connections

Data centres now account for around 73 GW of Britain's demand connection queue; this poses a significant challenge under a first come, first served connections process. With the reformed generation connections process now subject to new readiness and strategic alignment criteria, Ofgem, NESO and the government are turning their attention to the demand side.

Our latest article explores the detail and impact of two proposals set out in a consultation published by Ofgem at the end of July. The measures are designed to address specific problems with the composition and behaviour of the demand-side connection queue caused by the sheer volume of capacity being sought by data centres. They comprise:

• a returnable commitment fee sized at approximately £237,500 to £712,500 per MW of requested capacity, and
• new queue management milestones which require provision of evidence of project progression at different stages.

While the proposals acknowledge the scope for different data centre development business models, they create a tension for developers and investors as they balance decisions on locking in customer, supplier and financing arrangements to meet the additional requirements while also ensuring the best available contract terms, project structure and, ultimately, IRR.  

Those involved in the sector will want to understand the detail of this consultation, consider providing feedback to Ofgem before the close of this consultation on 16th September and track the outcome closely. Read our article here for the detail.

Please get in touch with your usual Linklaters contact, or the contacts in the article, if you would like to discuss any of Ofgem's proposals or their impact.