Mind the bottleneck

The risk is that demand connections now become the next bottleneck for growth. The opportunity is to learn from what already works elsewhere in the system, and ensure that reform moves beyond queue management to unlock real delivery capacity.

The urgency of this shift is clear. Demand-side projects are no longer marginal to the energy system. If we look at data centres alone, they are becoming strategically critical infrastructure, underpinning everything from AI and cloud computing to public services and industrial productivity. If these projects cannot secure timely grid connections, the consequences extend well beyond individual developments and will hit the UK’s competitiveness.

Ofgem’s consultation rightly focuses on cleaning up the demand queue. Measures under consideration including stronger readiness criteria, financial commitment mechanisms and alignment with the discipline already applied to generation projects, are sensible and overdue. They should help deter speculative applications and ensure that scarce capacity is reserved for projects that are serious and deliverable.

But there is a risk in assuming that queue reform alone will solve the problem. Even a perfectly curated queue cannot overcome a more fundamental constraint: who is actually allowed to build the grid.

Our own recent analysis, based on a survey of 800 senior infrastructure leaders, showed that confidence in grid reform remains fragile. While most respondents support tighter queue discipline, almost half fear that reforms risk favouring larger players unless delivery capacity itself is expanded.

Under the current framework, generation developers can self-build networks and connect directly to the transmission system. Demand users - such as data centres, EV hubs or hydrogen producers - cannot. They remain dependent on incumbent transmission network operators to deliver connections, and that is regardless of how ready or well-funded those projects may be. As demand grows, this asymmetry is becoming increasingly problematic because it determines not just who connects, but how quickly, and at what cost.

This dichotomy is based on legislation created decades ago when the Electricity Act (1989) came into force. This was a time when regulators could not have envisaged such large power hungry users like data centres would connect directly to the grid in such high numbers. The generation licence allows generators to construct, own and operate their own sole-use transmission-voltage connection assets. These assets are treated in law as part of the “generation business”, not the transmission system. In addition, the Energy Act (2013) amended section 4 of the Electricity Act to provide a specific statutory exemption allowing offshore generators to construct and commission offshore transmission assets prior to their transfer to an OFTO.

It feels to me like the demand queue issues we face today warrant a similar change in legislation to enable the change in behaviours needed to unlock the gridlock. This matters because network build times, not project readiness, are now one of the dominant factors shaping delivery. Developers may have land, planning consent and capital in place, yet still face years of uncertainty while waiting for transmission reinforcement. In that context, tightening queue entry requirements risks addressing symptoms rather than causes.

There is, however, a proven alternative already operating elsewhere in the system. At distribution level, competition has been a feature of connections delivery for more than two decades. Independent Distribution Network Operators (IDNOs) now deliver the majority of new connections, operating to regulated standards while bringing additional capital, flexibility and delivery capacity. According to the Independent Networks Association, more than 80% of new distribution connections in 2024 were adopted by IDNOs.

No equivalent option exists at transmission level. High-voltage assets remain the preserve of incumbent operators, creating a structural bottleneck at precisely the moment demand for connections is rising most sharply. Opening this part of the market (through an independent transmission licence analogous to the IDNO model) would not weaken regulation or system security. Instead, it would allow qualified private operators to build and operate defined elements of the transmission network under Ofgem oversight, increasing capacity and resilience in the system.

For demand-side projects, the implications are significant. Allowing supply and demand to be treated symmetrically as transmission assets would enable data centres and other large users to self-build connections where appropriate, reducing reliance on a single delivery route and shortening timelines. This is a “no-regret” action: it builds on established regulatory precedent, attracts private capital and directly supports Ofgem’s objective of accelerating connections without compromising standards.

As Ofgem considers responses to the consultation, four principles should guide the next phase of reform.

1. Strategically important demand must be prioritised transparently. The consultation recognises that not all demand is equal, but the actual criteria for prioritisation needs to be better articulated and, naturally, consistently applied.
2. Readiness and financial requirements should be proportionate. Stronger discipline is, of course, necessary to deter merely speculative projects, but we shouldn’t be taking a one-size-fits-all approach as this risks excluding smaller schemes or innovative projects that can deliver at local level while offering economic value.
3. Delivery must be opened to competition. Extending competitive models into transmission would increase capacity, reduce dependency on incumbents and give developers greater certainty over outcomes.
4. Space should be preserved for smaller and community-led projects. Gate 2 has already shown how scale can dominate allocation. Without safeguards, the same pattern will emerge on the demand side.

The Call for Input on Demand Connections Reform closes on 13 March. It is an important moment. Gate 2 demonstrated that reform is possible but also that queue management alone cannot deliver a fair or efficient system. Demand reform now has the chance to go further, addressing the structural constraints that sit behind the queues.

Britain has the ingredients it needs: proven competitive models, a growing pipeline of strategic demand and billions of pounds of capital ready to invest. The challenge and the opportunity is to ensure the rules allow that capacity to be built. If demand reform succeeds in doing so, it will not just clear another queue. It will help future-proof the grid for the next phase of growth.