Ofgem details proposals to remove speculation from the demand connections queue

techUK has been working closely with Ofgem, NESO and Government since late 2025 on demand connections reform - a process that aims to remove speculative applications from the significantly inflated queue to connect to the grid, while ensuring viable, strategically important projects see much shorter waiting times.

Ofgem has now (July 2026) published the long-awaited Curate - Demand Connections Reform consultation, setting out its proposed next steps. Curate is the first of three pillars of reforms, aiming to deter speculative developers from holding capacity without overly burdening viable projects. These reforms are urgent, as the queue - which now includes 73GW of data centre applications across transmission and distribution - is arguably the most significant barrier to data centre development in the UK. techUK has consistently argued that the majority of these projects will never see energisation and must be removed.

Financial mechanism

The consultation proposes a commitment fee value for projects above a 40 MW threshold in the range of £237,500/MW to £712,500/MW, which represents around 2.5% to 7.5% of an average data centre project’s CapEx of £9,500,000/MW. For example, a 100MW data centre would have to secure £23.8 million to £71.3 million at the point of accepting a connection offer and have it returned at energisation. If the project is terminated, this amount will be paid in full.

Ofgem's reasoning for setting the fee so high is that similar financial mechanisms in other jurisdictions have not worked, and it considers CapEx more appropriate than DeEx as it scales to size. The logic behind the 40MW threshold is that smaller developers should not be unfairly burdened and that 99% of total capacity in the queue will still be captured by this fee.

Gate 2 readiness requirements

Ofgem plans to introduce three new termination milestones at different stages for data centres only. These would cover projects of 10MW and above, connected at both transmission and distribution, and apply slightly differently based on whether developers take the "self-operation" pathway or "lease or sale" pathway. Ofgem notes that stage 1 is forward dating while stages 2 and 3 are backward dating, like the existing queue milestones as part of TMO4+, and that the compute offtaker requirement at M0.5 Dc is non-binding whereas by M6. Dc it is binding.

The techUK view

Reforming the queue is vital to sustaining a healthy UK data centre sector and we welcome Ofgem’s significant work on this pressing issue. Readiness requirements will help to ensure only viable projects progress and it is positive to see some of our recommendations, e.g. financial capability and the look-back test, under consideration.

Whilst we are strongly supportive of a financial mechanism, the extremely high commitment fee in this consultation is a significant area of concern and risks making the UK far less attractive as an investment destination for data centres. Maintaining pace in the global AI and digitalisation race will not be achieved through burdensome costs such as these.

We will be making the case for a more proportionate, yet still effective, approach. Get in touch with the team below to have your say:

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