Data centre developers in the UK could be required to pay hundreds of millions up front for connecting to the electricity grid, according to a proposal by Ofgem.

The British energy regulator suggests charging a refundable fee between £237,500 and £712,500 per megawatt. This means that those seeking 1 gigawatt of power would have to cough up hundreds of millions immediately, with the deposit refunded upon completion.

This move comes after a surge in demand for grid connections, reflecting rapid growth in artificial intelligence (AI) computing needs. Data centres are crucial for storing and processing data, powering digital services and AI systems.

The proposal aims to tackle speculative projects that secure scarce network capacity without any intention of connecting. Eleanor Warburton, Ofgem's director for energy system design and development, highlighted the need to address the 'risks created by speculative projects taking up space in the system'.