Ofgem Proposes Data Centre Commitment Fee to Curb Speculative Grid Connection Projects

The UK’s energy regulator, Ofgem, has launched a new consultation aimed at tackling the surge of speculative data center applications clogging the country’s electricity grid connection queue. The proposal comes as demand connection applications have skyrocketed from 41 GW to 125 GW in less than a year—driven primarily by the data center sector, which accounts for roughly 80 GW of the new demand.

Under the proposed reforms, large-load data centers would be required to pay a “Data Centre Commitment Fee” when accepting a connection offer. The fee would be refunded if the project is successfully energized, but forfeited if the project exits the queue early. Ofgem has set the fee between £237,500 ($315,875) and £712,500 ($947,625) per megawatt, which it says represents approximately 2.5% to 7.5% of average project costs. The regulator argues that the fee will help weed out speculative projects with no firm intention to connect, ultimately protecting consumers, improving confidence in network planning, and allowing viable projects to connect more quickly.

Alongside the fee, Ofgem also announced plans to consult on new data center-specific queue management milestones. These would require developers to demonstrate tangible progress—such as financial capability, commercial maturity, and procurement activity—to maintain their place in the queue. Ofgem’s director for Energy System Design and Development, Eleanor Warburton, said: “We’re consulting on a new data center commitment fee and stronger requirements to ensure projects demonstrate real commitment before securing scarce network capacity. These reforms will help free up capacity for viable projects, improve confidence in network planning and support faster connections where they are needed most.” She added that the reforms could also accelerate economic growth by bringing forward investment and enabling businesses to be built and expanded sooner.

The consultation is open until September 16, 2026, and is a key component of the wider Demand Connections Reform program led by Ofgem, the Department for Energy Security and Net Zero (DESNZ), and the National Energy System Operator (NESO). The program is built around three pillars: ensuring only viable projects enter and remain in the queue, supporting government-led prioritization of strategically important projects, and accelerating physical grid connections. The announcement follows reports last month that Ofgem is also considering mandatory power curtailment for data centers during periods of system stress, arguing that greater control over large power users could improve grid flexibility while maintaining reliability.