Ofgem launches consultation on reforms to overhaul demand connections - with data centres firmly in focus

A demand queue under unprecedented strain

This consultation responds to the unprecedented surge in demand connections from 41GW in November 2024 to 125GW in June 2025, compared  to peak GB electricity demand in February 2026 of 45GW. 

The policy proposals prioritise measures for data centres which comprise 50GW of the current queue, far beyond forecast future need.

In line with TM04+ generation connections reform, both existing and new demand projects are in-scope.  The demand connection reforms will apply to both transmission and distribution connected projects, with a proportionate approach at distribution level.

Three pillars: Curate, Plan, Connect

The proposals are based on three pillars:

• Curate: strengthen financial and ‘readiness’ criteria, to ensure only viable projects progress, and speculative projects exit the queue.
• Plan: introduce additional ‘needed’ criteria, to prioritise projects aligned with strategic policy objectives.
• Connect: increase the pace of network build and expand access to flexible and ramped connections.

Phase 1: immediate focus on data centres

Phase 1 applies to data centres specifically, given their outsized presence in the current demand queue.  

Specific options being considered in Phase 1 under the Curate pillar include:

• Financial: refundable deposits linked to milestones, progressive commitment fees, and upfront non-refundable deposits.
• Readiness: additional project maturity indicators such as secured financing commitments and outline or full planning permission, applied as entry gates or milestone tests.

  Reform of demand security requirements at transmission, to a progressive, milestone-based regime aligned with generation, will continue under existing dedicated workstreams.

Ofgem expects to publish its minded-to positions for Phase 1 in Spring 2026.

Phase 2: strategic alignment across all demand users

Phase 2 will extend strengthened criteria across all demand sectors and introduce strategic alignment criteria based on wider UK Government policy, including the Industrial Strategy, AI Growth Zones, Strategic Spatial Energy Plans, and Regional Energy Strategic Plans.

Expanding connection capacity: opportunities for proactive sponsors

Alongside queue reform, Ofgem also seeks input on proposals to increase connection capacity:

• Increased self-build of high-voltage connection assets, supported by clearer interpretation of the Electricity Act 1989, alignment with existing code modifications, and a potential Independent Transmission Owner (iTO) licence to facilitate flexible hybrid facilities.
• Wider use of flexible and ramped connection arrangements.

Rapid implementation

Ofgem may (subject to consultation) use new powers under the Planning and Infrastructure Act 2025 to directly amend licences, codes, methodologies and connection agreements, to implement the reforms at pace.

What this means for data centre owners, operators and investors

The proposed reforms present both risks and opportunities for data centre owners, operators and investors:

• Queue positions may be re-opened or re-assessed.
• Applicants should prioritise financing, land control and planning certainty early in the development cycle.
• Well-capitalised sponsors will be advantaged by the new financial criteria.
• Projects aligned with industrial policy or located in AI Growth Zones or low-constraint areas, are likely to be prioritised.
• Applicants should seek to demonstrate strong employment and economic benefits.
• Ramped connections will reward modular build strategies.
• Sponsors who are less financially constrained (and more time‑constrained) should be able to influence the speed of connection assets delivery through self-build.
• Flexible and hybrid configurations will benefit from enhanced routes to earlier energisation.

How to respond

Stakeholder responses are requested by 13 March 2026 via this portal.

Ofgem will also establish two new advisory groups - the Curate Advisory Group and the Connect Task and Finish Group - alongside the existing Connections Delivery Board. Active participation in these forums will be critical for industry stakeholders seeking to shape policy direction and eventual minded‑to positions.

If you would like assistance in preparing a consultation response or engaging with Ofgem’s advisory groups, our expert energy and public policy teams will be delighted to help.  Please just contact Mark Nash and Scott Tindall.

Authored by Scott Tindall and Mark Nash.