UK Regulator Targets Data-Center Land-Grab On The Power Grid

Authored by Tsvetana Paraskova via OilPrice.com,

Britain’s energy regulator, Ofgem, on Wednesday launched a consultation on a proposed commitment fee for data center projects as part of broad reforms to ensure network capacity is used for projects that are ready and able to connect.

The proposal includes a new Data Centre Commitment Fee, which would be paid by large data center developments when accepting a connection offer, Ofgem said in a statement.

The fee would be refunded when the project reaches grid connection status and forfeited if the project exits the grid queue early.  The fee would be set within a proposed range of £237,500 to £712,500 per megawatt (MW), equivalent to around 2.5% to 7.5% of average project costs.

“The proposals are aimed at tackling speculative projects from securing scarce network capacity without any firm intention to connect, ensuring the queue enables investment ready, viable projects,” Ofgem said.

Plans for a commitment fee for data centers were drawn up after the UK saw a surge in connection applications in the past two years, driven largely by demand from data center projects.

“Ofgem is concerned that a significant number of projects in the queue may not ultimately proceed, potentially delaying viable developments and creating misleading signals about future network investment needs,” the regulator said.

Last year, Ofgem approved an investment program of $32 billion (£24 billion) to maintain essential gas distribution networks and expand the power grid in a move to boost energy security and allow more renewables to enter the electricity system.

However, demand and applications for connections have soared over the past year, mostly driven by plans for data centers.

“The connections system must work for consumers and for the projects that are ready to invest, build and connect,” said Eleanor Warburton, Ofgem’s Director for Energy System Design and Development.

“Where speculative projects take up space in the queue, they can delay other schemes and create uncertainty about future network needs,” the official added.