Ofgem’s consultation on a Data Centre Commitment Fee closes on 16 September. The proposal asks large data center projects to put down between £237,500 and £712,500 per megawatt when they accept a grid connection offer. The money comes back at energisation and is forfeited if the project walks away early. On a 300MW campus that is somewhere between £71m and £214m of cash parked for years before a single slab is poured. It will not shrink the UK pipeline so much as sort it, and the sorted version is the one worth bidding.
Britain’s demand connection queue grew from 41GW in November 2024 to 125GW by June 2025. Peak electricity demand across the whole country sits at roughly 45GW. So the queue now holds close to three times the power the nation draws at its busiest moment, and around 80GW of that surge arrived as data center applications. Ofgem’s reading of that is unsentimental. A lot of those projects were never going to be built.
On 29 July the regulator published its Curate consultation, part of a wider Demand Connections Reform programme run with DESNZ and NESO, and proposed the bluntest filter available. Money. The Data Centre Commitment Fee would be payable when a developer accepts a connection offer, refunded once the project energises, and lost outright if the project exits the queue early. Slaughter and May, writing for developer clients, called the likely effect an outright cull rather than a tidy-up.
For most people reading this, the fee is not your bill. It still reshapes your year. It decides which schemes in that 125GW hold their place and which quietly withdraw, and therefore which projects in your pipeline tracker ever turn into a tender. Which makes it the most consequential piece of UK construction policy nobody in construction has read.
The fee is a deposit, not a tax
Who pays it, when it lands, and what it takes to get it back
The mechanics are simpler than the number suggests. A data center project with contracted import capacity at or above 40MW pays the fee as additional termination liability, backed by up-front credit security, at the point it accepts a connection offer. Ofgem sizes the range at £237,500 to £712,500 per megawatt, which it puts at roughly 2.5 to 7.5 percent of average project cost. Reach energisation and the money comes back. Leave the queue before then and it is gone.
That structure is doing something specific. An option on 200MW currently costs a developer almost nothing to keep alive, which is exactly why so many of them exist. Attach nine figures of locked-up credit to that option and the calculation changes on the spot.
- Threshold. Applies to data center projects with contracted import capacity of 40MW or above.
- Trigger. Payable on acceptance of a connection offer, held as additional termination liability with matching credit security.
- Range. £237,500 to £712,500 per MW, around 2.5 to 7.5 percent of average project cost.
- Refund. Returned when the project energises. Forfeited if it exits the queue early.
- Scope. Hits existing offer holders as well as new applicants, with limited grace periods proposed.
The milestones matter as much as the money
Cash alone does not prove a project is real
Running alongside the fee is a set of data center specific queue management milestones. Developers would have to show tangible progress to keep their slot, evidenced through financial capability, commercial maturity and procurement activity. That third one is the interesting one for anybody selling into this market, because procurement activity means orders. Transformers, switchgear, cooling plant, the long-lead electrical kit that already runs past 128 weeks.
Put the two measures together and you get a filter that rewards developers who have actually started spending. A scheme with signed offtake, a funded balance sheet and a transformer order in the system clears both tests without much drama. A scheme with a land option and a slide deck does not clear either.
These reforms will help free up capacity for viable projects, improve confidence in network planning and support faster connections where they are needed most.Eleanor Warburton, Ofgem director for Energy System Design and Development
Run it on a real project
What the fee does to a development appraisal
Take the smallest scheme in scope, a 40MW site. At the bottom of the range that is £9.5m posted on acceptance. At the top it is £28.5m. Now take a hyperscale campus at 300MW, the size Apatura has proposed at Larbert. The same range gives you £71.25m to £213.75m, held from offer acceptance until the day power flows, which on most UK schemes is three to five years away.
The refund is real, but the cost of capital on it is not free. A developer carrying £200m of credit security for four years is carrying a serious drag, and that drag falls hardest on mid-sized independents and co-location specialists without a hyperscaler balance sheet behind them. A regional developer with three sites and a bridging facility cannot absorb it three times.
Which is the awkward part. A measure designed to clear out speculators will also clear out some viable schemes whose only real problem is that they are smaller. Ofgem knows this, which is why the consultation asks where in that wide range the fee should actually sit. Half a million a megawatt versus a quarter of a million a megawatt is not a rounding difference. It is the line between a filter and a wall.
What changes if you build rather than develop
A shorter queue is a better pipeline
Contractors have spent two years resourcing against a pipeline number that was mostly fiction. A 125GW queue tells you nothing about workload because most of it was never funded. If the fee lands anywhere near the middle of the proposed range, the projects that remain will be the ones with money committed and equipment ordered, which is a far more honest basis for hiring electricians and committing a commissioning team.
Schemes that cannot justify the fee will not all die, either. Some will look harder at behind-the-meter generation, brownfield sites with existing heavy connections, or phased builds that stay under the 40MW threshold. Each route carries different work packages, and the phased sub-40MW option could push real demand toward mid-market contractors who were never going to win a hyperscale campus anyway.
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| Project profile | Fee exposure at £237,500/MW | Fee exposure at £712,500/MW | Likely outcome |
|---|---|---|---|
| Phased site, under 40MW per phase | Out of scope as proposed | Out of scope as proposed | Design pressure toward smaller phases |
| 40MW co-location scheme | £9.5m | £28.5m | Viable with funding, painful without |
| 100MW independent developer | £23.75m | £71.25m | Depends entirely on where the rate lands |
| 300MW hyperscale campus | £71.25m | £213.75m | Absorbable for backed developers only |
It is a proposed payment from large data center developments at the point they accept a grid connection offer, structured as additional termination liability with matching up-front credit security. Ofgem has set the indicative range at £237,500 to £712,500 per megawatt of contracted capacity, roughly 2.5 to 7.5 percent of average project cost. The money is refunded when the project energises and forfeited if it leaves the queue early. (Source)
As drafted, data center projects with contracted import capacity of 40MW or more. The measures are aimed at mid and large scale schemes, and they would reach holders of existing transmission and distribution connection offers as well as new applicants and those varying offers after implementation. Only limited grace periods and exceptions have been proposed. (Source)
Contracted demand connection applications rose from 41GW in November 2024 to 125GW by June 2025. Data center developments account for at least 80GW of those applications, and Ofgem’s consultation document identifies around 73GW of data center demand sitting inside the existing queue. For scale, recorded UK peak electricity demand is about 45GW. (Source)
Alongside the fee, Ofgem is consulting on data center specific milestones requiring developers to demonstrate real progress to keep their queue position. Evidence would cover financial capability, commercial maturity and procurement activity. In practice that means funded projects with equipment on order hold their slots, and paper projects do not. (Source)
That is the open question in the consultation. Legal advisers to developers have argued the measures are likely to work as a cull rather than a curation, and the concern is that smaller independents without hyperscaler balance sheets get filtered out alongside the speculators. Where the rate lands inside the proposed range will decide it. (Source)
The Demand Connections Reform programme has three strands. Curate removes speculative and non-viable projects, led by Ofgem. Plan prioritises strategically important projects, led by DESNZ. Connect opens more viable routes to a grid connection, led by Ofgem. This consultation is the first set of Curate measures, and it applies to data centers only for now, though Ofgem has signalled similar measures could follow for other demand projects. (Source)
Two things. Respond if the threshold or the rate would materially affect your workload, because the industry voices in this consultation are overwhelmingly developers and energy lawyers rather than builders. Then re-score your own pipeline against the 40MW line and ask clients directly whether they can post the security, which is a quicker test of a scheme’s reality than any programme they will hand you. (Source)
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