Location, location, location: why data centre siting policy needs more than grid logic

Comments made last week by Fintan Slye, chief executive of the National Energy System Operator (NESO), at the Aurora Spring Forum have attracted attention. Slye urged data centre developers to consider Scotland over south-east England, warning that new projects near the capital risk exacerbating existing grid constraints and pushing up costs for consumers.

techUK and its members share NESO's commitment to a stable, affordable and decarbonised grid. Grid constraint in south-east England is real, and it requires urgent and sustained investment. But the framing of the debate - that grid convenience should drive location decisions for digital infrastructure - deserves scrutiny.

The connection queue: context matters

Slye revealed that almost 100 gigawatts of data centre capacity is in the queue to connect to the electricity network, roughly double the UK's peak electricity demand. That figure sounds alarming. It should, however, be read carefully.

A substantial proportion of those applications are speculative. Ofgem's Demand Connections Call for Input, published in February, identified approximately 50 GW of data centres in the demand queue, while explicitly acknowledging that a significant number of those projects are unlikely to be viable. The pipeline will rationalise considerably as Gate 2 readiness criteria are applied and projects are properly scrutinised. Treating the headline figure as imminent load risks distorting the policy debate and misinforming investment decisions.

techUK has been advocating for precisely this kind of reform. In 2025, we led sustained engagement with Ofgem, NESO, DESNZ and DSIT on queue management, capacity visibility and end-to-end connections reform, and we will continue to do so. As we set out in our Data Centres Programme review of 2025, getting the connection process right is one of the most consequential policy challenges facing the sector.

Latency is physics

Data centres are not interchangeable with other large electricity consumers. They are precision infrastructure, and their relationship to end-users is an operational requirement, not a preference.

Network latency — the time it takes data to travel between a facility and its users — is governed by the laws of physics. For applications requiring real-time responsiveness, including financial services, healthcare systems, emergency communications and AI inference at scale, the distance between a data centre and its users directly affects whether those services can function. Asking operators to relocate to Scotland purely for grid convenience is a little like suggesting offshore wind farms be built where there is limited wind: supply-side logic cannot override demand-side reality.

This is not a minor technical consideration. The UK currently has around 1.6 gigawatts of data centre capacity, concentrated largely around London, and the government's ambition is to grow that to six gigawatts by the end of this decade as part of its AI superpower agenda. Getting the location policy wrong would undermine the very industrial strategy it is meant to serve.

The right answer: flexibility and smarter use of existing infrastructure

None of this is to dismiss the genuine challenge of managing grid stress in south-east England. But the solutions lie elsewhere.

First, smarter use of existing grid infrastructure. Whilst accelerated investment in grid buildout is absolutely vital in some areas, these costs are ultimately passed down to consumers. Transparency over the costs of upgrading the grid and comprehensive consultation with industry on how these can be limited through more efficient use of existing infrastructure will ensure decarbonisation needs are balanced with affordability. https://www.techuk.org/resource/report-powering-digital-infrastructure.html

Second, tried-and-tested flexibility solutions. Slye stated that data centre developers are increasingly willing to flex their consumption at peak times, yet for many operators this is a significant operational challenge. Any move towards mandated flexibility as a condition of connection would be a huge mistake. The focus should be on leveraging proven, scalable sources of flexibility such as battery storage and vehicle-to-grid charging. These are the levers that can relieve constraint without redirecting critical digital infrastructure away from the population centres it serves.

Scotland's role: complementary, not substitutive

Scotland has significant advantages for data centre development. Abundant renewable energy, available land and, as Slye rightly noted, a system operator willing to support new demand that helps absorb wind generation currently being curtailed at considerable cost to consumers. techUK welcomes data centre investment in Scotland, and we recognise the important role that operators considering campus-scale or hyperscale deployment — where latency requirements are less acute — can play in a more geographically distributed UK market.

Scotland's considerable strengths make it a compelling destination for data centre investment, and techUK actively welcomes that growth. The point is not to rank regions, but to ensure that investment across the UK — north and south — is driven by operational need and market signals, not by grid convenience alone. A location-neutral policy framework that provides the right incentives on costs, connection timelines and flexibility would serve that goal far better than top-down directional guidance.

techUK's position

Data centres are foundational to the UK's ambitions in AI and digital infrastructure. They support public services, financial markets, healthcare and the broader digital economy. Getting their location policy right matters enormously — not just for industry, but for every business and household that depends on digital services.

techUK welcomes the opportunity to work with NESO, Ofgem and government to develop frameworks that serve both the grid and the digital economy. We would encourage any data centre developers or operators wishing to engage on these issues to get in touch with the techUK Data Centres Programme.

Data Centres Programme activities

techUK provides a collective voice for UK Data Centre operators working with government to improve the business environment for our members. We keep members up to date with the key technical and regulatory developments that may impact growth and on funding opportunities that may increase commercial competitiveness. Visit the programme page here.