Ghost Data Centres Are Jamming Britain's Power Grid, and AI Is to Blame

Key points

• Between November 2024 and June 2025, the total electricity demand of projects queuing to join the UK power grid jumped from 41 gigawatts to 125 gigawatts, according to Ofgem, the UK's energy regulator.
• New data centres account for 73 gigawatts of that demand, roughly one and a half times the peak electricity use of the entire UK last year.
• Ofgem proposed in July 2025 that developers pay a steep, non-refundable deposit, potentially hundreds of millions of dollars for the biggest sites, to secure a grid connection.
• Fees set too high could push data centre investment toward the US and continental Europe, where power is cheaper and permitting faster.
• An industry feedback period on the proposals closes in September 2025, after which Ofgem will set a final fee.

Imagine buying a concert ticket just to resell it at a profit, except the ticket is access to Britain's national power grid and the price of entry is almost nothing. That, in miniature, is what has been happening with data centres across the UK.

Data centres, the vast buildings packed with computer servers that run AI software, need enormous amounts of electricity. Getting a grid connection takes years. So developers have been reserving spots in the queue for sites they have no firm plan to build, betting that if AI keeps booming they can either develop the site later or sell it on, grid slot included. Until recently, joining the queue cost only a few thousand dollars. A no-lose gamble.

What is the actual size of the problem?

Large enough that people inside the industry call it "absolutely insane." Between November 2024 and June 2025, the electricity demand of all projects in the UK grid connection queue tripled, from 41 gigawatts to 125 gigawatts, according to Ofgem. Data centres alone account for 73 gigawatts, more than the entire UK typically uses at its busiest winter moment.

The government believes most of those applications are phantom projects: reservations made without real funding or real plans. The consequences reach beyond bureaucracy. Grid operators, the teams responsible for keeping the national electricity network stable, must treat every application as genuine when they calculate whether the system can handle the load. More ghost projects mean longer, costlier studies for every serious developer waiting behind them. Real AI infrastructure gets delayed.

"They have to treat every project as serious," says Olivier Darmouni, associate professor of finance at HEC Paris Business School. "The more speculative projects are especially damaging because they make these studies more complex, more expensive, longer."

As we reported on 27 August in "Nobody Wants a Data Centre Next Door. So Who Decides Where They Go?", communities across the UK are already pushing back against the buildings that do get built. A grid clogged with phantom applications makes it harder to site the legitimate ones.

How does Ofgem plan to fix it?

Ofgem wants to raise the cost of queue-jumping high enough that speculators walk away. Its July 2025 proposal would require developers to pay a steep, non-refundable deposit, potentially running to hundreds of millions of dollars for the largest sites, and to show they have paying customers and funding secured before holding a grid slot.

The logic is simple: if the gamble costs real money, only serious builders take it.

"It's going to pour water on a lot of the speculative data centre applications," says Alex Burgoyne, head of data centres at property consultancy Knight Frank. A cleaner queue would also help grid planners direct upgrade spending where it is actually needed, rather than building capacity for sites that will never switch on.

Could the cure be worse than the disease?

Possibly. Britain already has two strikes against it as a data centre destination: high energy costs and a shortage of large, affordable land. Steep upfront fees could tip investment decisions toward the US or parts of Europe offering cheaper power and faster permitting.

Smaller AI-focused operators, some of whom have pledged billions to UK projects, may refuse to commit hundreds of millions before signing a single customer. That hands the market to a handful of giants and slows the growth the government wants.

"If you set it too high, you risk killing viable projects," says Daniel Newton, a digital infrastructure partner at law firm Slaughter and May.

Ofgem says it will consider industry responses before finalising the fee and acknowledges that direct comparisons with other countries are complicated by differences in how energy markets work. The feedback window closes in September 2025. Get the deposit calibration wrong in either direction and the damage is real: too low and the phantoms stay, too high and the builders leave.

Common questions

Why does this matter to ordinary people, not just tech companies?

Data centres power the AI tools and cloud apps that most people use every day. If Britain cannot attract reliable data centre investment, those services may become slower or more expensive for UK users, and the economic benefits flow elsewhere.

What is a gigawatt, and how much power is 73 of them?

A gigawatt is one billion watts, roughly the output of a large nuclear power station. Seventy-three gigawatts exceeds what the whole of the UK typically uses at its busiest moment on a winter evening.

Will the Ofgem fee affect my energy bill?

Not directly. The fee targets developers, not consumers. But if the reforms help grid planners invest in the right places, they could reduce wasted spending on infrastructure that was never needed, which eventually feeds into network costs that do appear on bills.