Britain Offers Data Centers Grid Priority, With Conditions

LONDON, Oct. 28 — BritainBritain will use new powers to move data centers it deems strategic up the queue for grid connections, and let the most important of them make their own electricity on site while they wait, in return for meeting five tests on power bills, local investment, the environment, jobs and security. John Healey, the chancellor of the Exchequer, set out the bargain, which the government calls the Data Centre Covenant, in his first Budget on Wednesday.

The government estimates that Britain needs 6 gigawatts of AI data-center capacity by 2030, which its draft planning statement puts at about three times the country’s existing capacity, by an estimate that leaves out companies’ own in-house data centers. Ofgem, the energy regulator, counted about 315 data-center projects with 73 gigawatts of contracted connection capacity in a consultation it published in July. That is more than the roughly 45-gigawatt peak in Great Britain’s net demand on the transmission system in the winter of 2025–26. The covenant trades places in that line.

The government would reserve future grid capacity for the projects it names, and hand them capacity freed when others leave the queue. Where that is not enough, it may use powers under the Planning and Infrastructure Act to transfer data centers’ contracts for connections before 2030 to strategically important ones, without, the energy department says, “impacting wider demand customers.”The Control CentreA new Ministerial Control Centre, chaired by the Minister for AI and supported by the Exchequer Secretary to the Treasury, will consider help for strategic sites. The two posts are held by Kanishka Narayan and Daniel Tomlinson, who signed the foreword to the draft planning policy published with the covenant.

Every data center is “encouraged” to meet the tests; those seeking the government’s help must. They are to pay “their fair share of energy – covering any energy costs they create,” so that households and other businesses “do not pick up the bill”; agree a “Local Benefit Plan” of “substantial investment”; design new facilities to a power usage effectiveness of 1.3 or better; hire locally, “prioritise UK suppliers” and contribute to “British AI hardware”; and provide secure computing for the NHS and other public services.

Mr. Healey called it a deal, with “strict tests” for data centers to “invest in local communities, create local jobs and protect local water supplies.” “In return, critical data centres will get the grid connections they need, and, where necessary, be allowed to build onsite generation while they wait,” he told the House of Commons.

In return, critical data centres will get the grid connections they need, and, where necessary, be allowed to build onsite generation while they wait.

On-site generation is reserved for “exceptionally strategic projects,” where the other measures cannot find capacity in time, and on conditions “such as ensuring energy security.” The covenant does not yet say which data centers count as strategic; the government “will set out further details in due course.”

After 2030, the government intends to fit data-center connections to regional targets that “will place limits on the volumes that can connect in each region,” weighing grid capacity and “water and land availability,” the Department for Energy Security and Net Zero said, answering a consultation that drew 156 replies. Some developers “warned that prescriptive UK rules could increase uncertainty and divert globally mobile investment to Europe or North America,” it reported.

Many respondents feared that prioritization could connect “less viable projects” ahead of viable “non-strategic” ones, and some that costs could be passed on to consumers. The department says the projects it picks must still meet the queue’s readiness milestones, and that the measures are designed to work “without causing delays to other viable projects in the queue.”

A draft National Policy Statement for Data Centres, covering England, says projects of at least 100 megawatts of rated IT load are “likely to be considered of national significance,” making them candidates for a decision by a secretary of state rather than the local council.Nationally SignificantUnder the Planning Act 2008, nationally significant infrastructure projects are examined by the Planning Inspectorate and decided by a secretary of state. Data centers can be directed into that regime on request under regulations that took effect in January 2026, the draft says. They are expected to show designs that meet the 1.3 standard. Comments close on Jan. 8.

The Budget says the government has invested “over £700 million” in AI, and it will put “around £500 million” into security, including £120 million more for the AI Security Institute through 2029-30 and £40 million for a new National Agentic Security Unit to “detect, investigate and respond to cases of rogue agentic systems.” The Sovereign AI Unit, which invests in British AI companies, gets £140 million more: £60 million for its fund from 2027-28, with a new focus on “physical AI” such as robotics, and £80 million for a procurement scheme whose aims include “innovative approaches to warfighting.”The PreviewThe Treasury’s Oct. 24 preview of the package had no agentic unit, and put £60 million, not £80 million, into the procurement scheme. The £100 million AI Biosecurity Lab, announced on Oct. 24, is funded from 2027-28 to 2029-30, and “will be supported by up to £200 million in AI model credits from OpenAI and Anthropic,” the Budget says.

Giles Hanglin, chief executive of Apatura, a company looking to capitalize on proposed data-center growth in Scotland, said that with its powers to “reserve and reallocate grid connections,” the covenant was “the strongest measure set out in today’s Budget,” The National, a Scottish newspaper, reported. “So far there’s very little detail coming from the UK Government about what this idea of a ‘data centre covenant’ really means,” Patrick Harvie, the Scottish Greens’ economy spokesman, told the paper. Scotland’s government said the announcements “are being examined.”

Next come the definition of “strategic”; Ofgem’s decision, due in the first quarter of 2027, on a fee meant to push speculative data-center projects out of the queue; and the priority rules themselves, which the energy department expects before the next window for connection applications opens.