Regen's response to Ofgem's Curate consultation on data centre demand connections

Ofgem's Curate consultation sets out proposals for a data centre commitment fee and a set of queue management milestones designed to clear speculative and non-viable projects from the demand connections queue. Our main test for these proposals is whether they appropriately incentivise data centres to operate on low-carbon electricity, in line with the UK's clean power and net zero goals. We support Ofgem's ambition to stop the queue itself from holding back viable projects, but the proposals as drafted do not adequately address the risk that they could push developers towards fossil fuel generation instead.

At least 100 data centres in the UK have applied for a grid connection. Overly stringent electricity grid connection fees may have the adverse effect of creating an electricity network deterrent, rather than simply trimming down the queue. For this reason, we suggest Ofgem place more weight on specific readiness criteria to accelerate connections for sites that can demonstrate they have achieved key milestones.

This builds on our response to the demand connections reform programme earlier this year, Demand Connections Reform – prioritisation, flexibility and fairness in the grid queue, in which we raised concerns about queue transparency, auction design and the case for mandating flexible connections.

Regen’s view

• We support the principle of a data centre commitment fee to remove non-viable and speculative projects from the queue, but are concerned that the level of the fee, and requiring it to be secured in full at offer acceptance, will push developers towards on-site or private wire connections powered by fossil fuels.
• We urge Ofgem to consider alternatives that achieve the same objectives while creating benefits for consumers and society, such as demonstrating renewable energy procurement, a consumer bill offset fund, and public benefit-sharing.
• We support a milestone-linked release of security (Option 1B), with any security refundable at least up to Milestone 2, given how much of the pre-consent stage of development sits outside of a developer's control.
• We're concerned the proposed 40 MW threshold risks a wave of sub-threshold applications (e.g. 39.9 MW) assembled into larger sites on the distribution network, which could compete with other emerging demand at this level, such as new housing developments.
• We support the proposed data centre queue management milestones and their consistent application across transmission and distribution. In our view, this framework, not the scale of the fee, is the more effective and proportionate tool for removing speculative projects from the queue.