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Roundtable
Addressing the “very high volume of demand connections” for industrial projects is the next big thing.
An important theme for the panel was whether there was scope for a greater level of strategic thinking about connecting infrastructure such as data centres where the economic potential is high. Could demand connection reform be modelled on transmission connection reform, which is aiming to address inefficiencies in the grid connection process, particularly long waiting times?
One panellist asked if there was potential for “greater creativity” in overcoming connectivity challenges. Another questioned whether we could reduce exposure of demand connection customers to high connection costs.
Overall, the panel agreed that “connecting customers is a good thing”. “It absolutely needs to happen for growth and jobs,” says one expert from a DNO. He adds that connecting customers quickly has financial benefits. “Connecting customers faster is important. There may be some degree of compromise while we continue to build the network – “that might mean occasionally flexing customer load, pairing up, or buying flexibility services".
The DNO expert adds that sometimes networks may be “too pragmatic” rather than looking at the bigger picture. “We should be thinking about what is right for Great Britain and building the network for that.”
“Connecting customers faster is important. There may be some degree of compromise while we continue to build the network – that might mean flexing customer load, pairing up, or buying flexibility services to help that connection happen”
If the grid can’t keep pace with demand connections, UK plc will suffer.
A connections manager at one network believes data centres should be viewed as critical national infrastructure. “I don’t think we have scoped what we need to do from a demand and transmission perspective to facilitate them,” he points out. “If we say, ‘it’s dependent on a brand-new grid supply point being built and you are looking at 13 or 14 years’… that doesn’t chime with government desire to create data centre areas. If the grid can’t keep pace, we are going to fall behind – and that is to the detriment of this country.”
The chief commercial officer at a data centre developer expands on the point. “Our shareholders put a lot of money into the business to develop data centres [a 100MW data centre will cost about £1.5 billion, for example] and with the challenges the UK has with power, I can’t provide certainties. That means we are having to look at other countries, which is a real shame.”
An appetite to change the connections process to prioritise data centre projects viewed as critical to the national cause may help, says the director of a utilities infrastructure firm.
“DNOs must work within the rules, which say, ‘first come, first served’. We need to ask if we can do something differently.”
A longer-term outlook than the current price control would help.
If we want Britain to be “the home for data centres” we should give “DNOs, TOs and DSOs the ability to prioritise projects with an outlook of not just five years but 10, 15 or 20 years", says a partner at a leading law firm.
“There needs to be a change in how we regulate this new industrial revolution, because currently it is a challenge,” adds the head of infrastructure from a trade association. They add that data centres are “a vehicle for industries to develop and grow”. “If you don’t have computational capacity in certain areas, you cannot grow your research and development, or you cannot build a research institute. We have a very short period where companies will invest in the UK. The energy sector shouldn’t be a blocker of that growth.”
Get it right, and data centres present an opportunity to develop regions of the country. There are already clusters of hyperscaler (AWS, Google and Microsoft) data centres in west London. “We see an opportunity to create another region in the country where these availability solutions exist,” says the data centre developer executive. “We’re at an inflection point for attracting investment from hyperscalers to locations, which could create new areas in the country where data centres are housed – supporting the government’s AI ambitions.”
He adds: “Obviously, there will be a challenge getting power to their sites – but there will be fewer challenges than we are witnessing in the southeast.” Another issue will be the cost of energy in the UK. “The fix would be to have a high energy user tariff allocated to AI growth zones to attract investment, carving out a new data centre strategy by having centres in geographies where you’ve got the ability to plan and schedule deployment solutions over the next 10 to 15 years, supporting the local economy and the local community.”
With data centres thirsty creatures, water infrastructure also needs to be considered. “Water is a huge area for us in this country. Water needs to be brought together with energy strategic planning. The two need to align.” That’s the view of a planner at the system level.
The demand connections regime should be adapted to critical national infrastructure strategy.
“We should ask where there is demand for data centres and adapt the connections regime accordingly,” says a strategic planner on the panel. “More work needs to be done on demand and how you best prioritise windows of application. As it stands, the criteria in the connections process isn’t about growth or jobs, it’s about the energy system.”
The government’s forthcoming Connections Accelerator should help. “We want the accelerator to be up and running by the end of the year,” explains a panellist from government. “We want to give major projects the strongest possible support, identifying them, getting connection data, and moving really quickly.” The forthcoming Planning and Infrastructure Bill should also help plan projects better, he adds.
The connections regime could be boosted if projects that were speculative in nature were de-prioritised to allow data centres to be built more quickly. The data centre developer says: “You do get developers or landowners wanting to fit their site with power and make a quick buck overnight, and that really muddies the waters, unfortunately. The queue is filled up with projects of that nature.
“So there needs to be a tiering structure of some description, which prioritises those who actually want to build a data centre – organisations with an established track record.”
It might help if the requirements to enter the queue were more stringent, explains a connections manager from a transmission owner. “If I have 20 grand, I can go out and put a data centre somewhere and it will be part of the mix – and that doesn’t feel right for critical national infrastructure.”
He adds: “I think there’s lots of things we can do in terms of queuing policy. But I’m not sure that a TMO4+ for demand is the right answer. Part of the material design consideration of TMO4+ is that you can put a limit on what’s needed because it links back to energy scenarios: you can say, ‘this is the level of clean power required in this country’. I’m not sure you can put a limit on the aspirations of a sector that needs to grow.”
But some form of preventing speculation impeding the development of genuine infrastructure is needed. “The principal problem I’ve seen over the years is that there is simply too much speculation out there,” agrees the law firm panellist.
Matching new generation projects with demand and creating partnerships would be a great way of alleviating the queue.
“When you start to pair things up, you accelerate,” points out the system planner. This should feed into Regional Energy Strategic Plans, they say. “What does the local community, region and local authority want? What are their plans and ambitions, and how we do we make sure energy networks realise them? One way of helping is to say, ‘we have this generation, and this demand’, and bringing them together.”
“If we can get people to buddy up, that would be wonderful,” says the expert at the DNO. “If you are a data centre producing a lot of heat, we can pair you up with a housing scheme, for example.”
Demand connections rise to prominence
Nigel Bessant, head of network operations, SSEN, explains why a strategic approach to demand connections is vital.
Our recent roundtable session on demand connections with Utility Week underlined the case for reform to the connections process, particularly when it comes to data centres.
These centres are critical to the UK’s digital and AI ambitions, though they also pose a challenge to network operators like ourselves here at SSEN Distribution, due to the high levels of electricity they consume. Their presence – and prominence – is only going to increase, so we need a more strategic, spatial, and forward-looking approach to their integration within the wider grid.
We see many competing priorities for capacity on our network and are highly regulated to ensure that we don’t discriminate across customers. The primary way of ensuring this non-discrimination is through a 'first come, first serve' model for capacity. We are keen to work with government to investigate whether that model remains the best way to support the UK industrial strategy to deliver economic growth.
A tiered framework, which prioritises schemes according to likely economic contribution, the maturity of plans, and the degree of alignment with wider infrastructure ambitions, could help ensure speculative developments don’t crowd out more viable – and more beneficial – schemes. We strongly support reforms that guide and allow networks to better differentiate between speculative and strategic demand, and to make decisions on that basis.
The signs of a move towards a longer-term, more integrated network plan are promising, and we were glad to see this vision referenced in Ofgem’s recent ED3 Framework Decision. The current, relatively short, five-year price control cycles risk discouraging some network operators from planning and investing in the level of infrastructure that would provide longer-term benefits. But extend the planning horizon out to 10 or 20 years, and there would be a chance for networks to align more effectively with regional development strategies, and the UK government’s own longer-term ambitions for AI and digital infrastructure.
Consider too the likely benefits of spatially aligning the planning of new network demand and generation sites; pair a data centre with locally based generation or heat reuse schemes, and there’s a clear opportunity to unlock greater efficiencies, and speed up connection times. We’re in favour of this kind of thinking, and through our Strategic Development Plans, we’re working to help make it happen, by aligning network development with local authority and community ambitions.
We also see the value in aligning our planning with that of the water sector; in addition to data centres’ power consumption, these sites might also need large volumes of water, depending on the cooling technology used. This kind of coordination could help such developments become more sustainable.
The UK government’s proposed Connections Accelerator Service, and its recently-published Planning and Infrastructure Bill, are both welcome; they offer the potential to streamline the connections process and give much-needed clarity for investors and developers.
For our part, we’ll keep working collaboratively with relevant parties to bring about improvements to the demand connections process. But it’ll take broader action, to focus on strategic projects, extend planning horizons, and foster integrated infrastructure planning, to fully ensure the UK remains competitive in the global digital economy, while also delivering benefits to local communities and the wider energy system.
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