Britain’s national grid, already under pressure over soaring demand, is facing a new challenge: AI data centres have been given government authority to jump the queue for scarce power connections, ahead of housing development.
Such is the strain on supply – demand for grid connections of all types grew 460% in the six months to last June, with some projects told they will have to wait 15 years for access – that in some areas the move could lead to an "effective moratorium on new homes", according to Steve Turner, executive director of the Home Builders Federation.
In 2022, three west London councils – Hillingdon, Ealing and Hounslow – were told that there were no grid connections available for the foreseeable future for residential developments above 25 homes; the Greater London Authority pinned the blame on a boom in local data centres. In 2024, Knight Frank found a third of surveyed residential developers faced delays due to grid power constraints. And this month, the government revealed plans to "prioritise strategically important projects including AI data centres and industrial sites" for grid connections.
The government’s move does not only risk its own target of delivering 1.5 million new homes over the next five years – it also jeopardises its net zero goals.
Gas heating was supposed to be phased out for newbuild housing last year in favour of energy-efficient heat pumps as part of the Future Homes Standard, says Anna Clarke, director of policy and public affairs at The Housing Forum. Yet because developers are struggling to get their housing projects connected to the grid, they are cutting their power requirements by ditching the electric pumps and reverting to gas boilers.
"There's a get-out for developers currently if there isn't enough electricity supply – a gas system might still be possible," Clarke said. "It may well be why the government has delayed the Future Homes Standard – they aren't yet confident that they could require new houses to have heat pumps without causing housebuilding to slump yet further."
Turner said: "It is frustrating that regulatory, planning and policy arrangements effectively prioritise energy-intensive data centres over energy-efficient homes for families."
The crunch will worsen as more gas boilers are ditched and housing is electrified, leading to a "zero-sum game where, in some locations, the choice will be housing or data centre", said Rico Wojtulewicz, director of policy and insight at the National Federation of Builders.
How did we get here?
During the decades of underinvestment following privatisation, a strategy emerged that was designed primarily to keep energy bills down, says Professor Gareth Harrison of the University of Edinburgh. Grid infrastructure was upgraded only on request, rather than strategically in advance. That made sense at the time – energy consumption had been falling as the UK deindustrialised.
Then the new wave of electrification began – heat pumps, electric vehicles – and in 2022 ChatGPT became publicly available, triggering the surge in AI investment and data centre construction. The grid was already struggling to keep pace; now the bill for decades of underinvestment is landing on consumers. Two-thirds of a typical household energy bill goes not to generating electricity but to catching up on infrastructure investment.
The crunch is felt most acutely in London and the south-east, which faces a chronic housing shortage and is home to more than 80% of UK data centres. "The potential increase in data centre energy use has rather caught people out," Harrison said, pointing to an estimated 50GW worth of data centre projects in the queue for a connection. "That's more than the current electricity demand [across the UK] on a cold winter night."
A grid connection means accessing a substation at a particular voltage level, explains Adam Bell, partner at Stonehaven Global. "If you've got a fixed number of transformers in your substation, you can only connect a fixed number of circuits." Upgrades are possible but slow – held back by a shortage of skilled workers, long lead times for specialised equipment, and a fragmented system split between distribution network operators, the National Energy System Operator and the regulator, Ofgem.
"It was obvious at the start of the 2020s that you were going to need to find ways of upgrading the network," Bell said. "It's taking a long time for the government and Ofgem to pull their finger out."
In short, we can't blame data centres for our own failure to invest in infrastructure. But we can insist that those who are accelerating the crisis help pay to fix it.
What could be done?
The UK currently has a massive queue for grid connections – and many of the data centre projects in it are little more than property speculation. If these "zombies" manage to secure a connection, the project is simply sold to a real developer, notes Merlin Hyman, chief executive of renewable energy firm Regen.
The government is considering measures to clean up the queue, perhaps with a deposit scheme or checks on the viability of projects.
Another approach is siting data centres where there is surplus grid capacity, renewable energy and no housing pressure – the logic behind some of the government's AI Growth Zones in Lanarkshire and south Wales.
There's a worry that the government is taking Big Tech PR as straightforward truth, uncritically repeating claims about the benefits
Data centre builders could also be required to contribute to grid upgrades, renewable generation or heat networks – neighbourhood-wide systems that distribute heating from a central source.
Then there is gas. This idea has made it into the Mayor of London’s infrastructure report, which includes reference to "Advanced Gas Connections for Data Centre Loads" – allowing gas to be used for onsite power generation. It may sound like a step backwards, but it is already happening at scale in the US, and the consequences are a warning to Britain.
The American lesson
Major players including Meta and xAI have built data centres that run on gas. Gas turbine orders in the US are at a 20-year high. Coal plants are coming out of retirement. And residents of Virginia – home to a concentration of the country's data centres – face projected bill increases of $200 a month by 2040 if data centres don't bear infrastructure costs directly. Research from the US NGO Global Energy Monitor found the number of planned gas projects linked to data centres leapt 25-fold in two years.
The political backlash has been fierce enough to reach the White House. Trump had promised to cut electricity prices in half in his first year; instead they rose 6%. So earlier this month, Amazon, Google, Meta, Microsoft, OpenAI, Oracle and xAI were summoned to sign the Ratepayer Protection Pledge – committing to build, buy or fund their own power generation and cover the cost of grid infrastructure their data centres require, rather than passing those costs to consumers.
"In short, America's largest and richest tech companies will be funding a colossal expansion of US energy," Trump said. Critics are sceptical – the Sierra Club environmental group called it "a pinky promise, nothing more" – but the direction of travel is clear, and it is bipartisan: Kentucky, California, Virginia, Ohio and Wisconsin have all passed or proposed state legislation to stop data centre costs being loaded on to ordinary bills.
Could a similar approach work in Britain? Requiring data centre developers to fund grid upgrades as a condition of priority access would be a meaningful start. It is the obvious quid pro quo that the government has so far failed to demand.
Building better
Why is the government favouring data centres over housing? The answer is economic – the promise of jobs and growth. "There's a worry that the government is taking Big Tech PR as straightforward truth, uncritically repeating claims about the benefits without looking at the costs," said Donald Campbell, director of advocacy at Foxglove, a non-profit legal group that targets tech abuses.
The job numbers, on closer inspection, are less impressive than billed. A report from Action to Protect Rural Scotland found that claims of 4,000 jobs created by an AI Growth Zone in Northumberland included temporary construction roles and just 100 direct permanent positions. And the investment itself may not be as solid as presented: the Guardian has reported that the UK's multibillion-pound AI drive is built on "phantom investments", prompting the government to admit it was not "playing an active role in auditing these commitments”.
We may be paying more on our energy bills and waiting longer for homes in order to attract investment that isn't actually there – and the government isn't bothering to check.
"They say they want to get us towards net zero, and they want to make sure more housing is built," Campbell said. "But data centres are directly running up against both of those goals. The last thing you need is an unthinking pile-on of huge extra demand for reasons that aren't entirely clear."
Nicole Kobie is a Wired contributing editor and futures editor at PC Pro, her latest book The Long History of the Future - Why Tomorrow’s Tech Still Isn’t Here is published by Bloomsbury Sigma