Ofgem, the UK's energy regulator, has proposed requiring datacentre projects to pay significant upfront fees or provide financial guarantees before they can secure a grid connection. The target is a connection queue that has ballooned to 315 projects representing 73 gigawatts (GW) of demand. To put that in perspective, 73GW is nearly 30GW above the UK's entire peak energy demand of 45GW, according to The Guardian. Reuters reported the proposals on July 28–29, 2026.

Under the proposals, Ofgem would set a commitment fee ranging from £237,500 to £712,500 per megawatt, which works out to roughly 2.5% to 7.5% of average connection costs. For context, large providers like Amazon and Microsoft would need to put down pledges of around £350 million to reserve 500MW of grid capacity. Developers can satisfy the requirement through letters of credit, bonds, or cash deposits. The financial security is demanded when a project receives a connection offer and returned when the datacentre is switched on.

The proposals also introduce what Ofgem calls "hard milestones" during the connection application process, such as securing customers and financial backing. Projects that fail to meet these targets would be removed from the queue. The full set of proposals will go through a consultation process to test feasibility before any implementation.

The queue has grown with striking speed. In February 2026, Ofgem reported 140 proposed datacentres with energy demands of 50GW in the queue. Five months later, both figures had jumped substantially, to 315 projects and 73GW. Ofgem had already flagged the trajectory: it reported a "surge in demand" for connection applications between November 2024 and June 2025, with a significant share coming from datacentres. That period prompted Ofgem to publish its "Demand Connections Reform: Call for Input" document on 12 February 2026, an early signal that the existing connection framework was straining under the volume.

For new datacentres in Great Britain, the time spent in the grid connection queue can stretch to 8–10 years on average, according to an Ofgem document. That delay, combined with the sheer volume of queued capacity, has created a system in which speculative projects can occupy queue positions for years without actually delivering any power demand, effectively blocking capacity that could go to projects closer to completion.

The phenomenon is not confined to the UK. The Uptime Institute identified 250 global datacentre projects exceeding 100MW in energy demand announced between 2021 and 2024. Uptime Institute estimates that half of those 250 projects will either not proceed or face significant delays, a signal that the gap between announced and delivered capacity is a structural feature of the industry, not an anomaly.

The scale of the mismatch is the central fact. A connection queue holding 73GW of datacentre demand against a national peak demand of 45GW means the queue alone, if fully built, would require roughly doubling the UK's current grid capacity. Even if only a fraction of queued projects reach completion, the aggregate demand from datacentres is on a trajectory that grid planners cannot ignore. Ofgem's fee and milestone proposals are designed to force developers to bear the cost of holding queue positions, filtering out projects that lack secured customers or financing before they consume planning resources.

The choice of instruments matters here. Letters of credit, bonds, and cash deposits impose varying balance-sheet costs depending on a developer's credit profile and capital structure. For hyperscalers with strong credit, the cost of a letter of credit is modest relative to the fee's nominal value. For smaller developers or speculative entrants, the same instrument may be materially more expensive or simply unavailable, concentrating the deterrent effect on precisely the projects Ofgem appears to be targeting. The £237,500–£712,500 per-megawatt range, set at 2.5–7.5% of average connection costs, is calibrated to be recoverable for serious projects while making queue speculation costly enough to deter it.

The broader context here is a regulator trying to stay ahead of an industry that has outpaced the infrastructure meant to support it. The consultation process will test industry pushback, particularly from smaller developers who may argue the financial security requirements create an undue barrier to entry. The milestone requirements also raise practical questions about how Ofgem and network operators will verify compliance and adjudicate disputes when milestones are contested. What is clear is that the status quo, with queue times approaching a decade and queued demand exceeding national peak demand, was not sustainable. Ofgem has now put a price on entry.