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As data center developers compete for a cut of the hundreds of billions of dollars flowing into the artificial intelligence industry, the queue to join the UK’s power grid has become jammed with projects that will likely never get built. The snarl is exacerbating already years-long wait times for viable projects, and it's messing with attempts to forecast energy demand and plan grid expansions.
In July, the UK’s energy regulator, Ofgem, laid out a proposal meant to force phantom data centers out of the swollen queue. Under the plans, set to be finalized after an industry feedback process that ends in September, developers would be required to put down a steep, nonrefundable deposit that could balloon to hundreds of millions of dollars for the very largest data centers. Developers would also be required to line up customers in advance and prove they have the funding to complete their builds.
However, Ofgem faces a Goldilocks conundrum: The reforms must be burdensome enough to deter speculators but not so much that they drive legitimate data center projects to other shores, undermining the UK’s ambitions to meet the voracious demand for the compute required to run sophisticated AI models.
Data center developers face delays almost everywhere; similar grid congestion issues afflict the US and countries across Europe. But whereas the US is a highly desirable market, Ofgem’s reforms risk making the UK—already unattractive for the high cost of energy and dearth of land—one of the world’s most expensive places to build a data center, industry experts believe.
The frenzied data center buildout “is bringing a huge amount of capital investment into the UK,” says Alex Burgoyne, head of data centers at real estate consultancy Knight Frank. “We don’t want to shoot the golden goose.”
Ofgem says that it will take into account industry concerns before settling on a fee, but that differences between international energy markets make like-for-like comparison difficult. “We recognize data centers are a key part of the UK's AI ambitions and future economic growth. Enabling viable data centers to connect more quickly is an enabler of this,” Nathan Macwhinnie, deputy director of strategic planning and connections at Ofgem, tells WIRED in a statement.
The queue to join the UK grid began to balloon toward the end of 2024, around the time the government designated data centers “critical national infrastructure.” Between November 2024 and June 2025, the total energy demand of the projects in the connection queue increased from 41 gigawatts to 125 gigawatts, according to Ofgem. New data centers make up 73 gigawatts of that—equivalent to one and a half times the peak demand for the entire UK last year—and counting.
The government has said it believes much of that demand is a mirage. “It’s absolutely insane,” says Taco Engelaar, managing director at grid optimization company Neara. “No one really understands … what the real grid demand will be because of these phantom projects.”
The crowded queue is largely the product of an incentives problem. Because developers face a years-long wait for grid access, and it has previously cost only a few thousand dollars to join the queue, they might as well apply for power, even if they do not have a watertight plan to develop a site. It’s a no-downside bet that allows developers to hedge for a future in which demand for compute remains sky-high.
However, because grid operators have to account for the combined effect of large infrastructure proposals on network stability before granting individual connections, phantom data centers can exacerbate already-lengthy delays for viable projects. “They have to treat every project as serious when they try to study whether the system can handle them,” says Olivier Darmouni, associate professor of finance at HEC Paris Business School, who has published research on the impact of AI on power grids. “The more speculative projects are especially damaging because they make these studies more complex, more expensive, longer.”
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