Microsoft has warned that billions of pounds of UK investment are at risk due to severe delays in securing connections to the country’s strained electricity grid.
The tech giant has expressed concerns that a backlog in grid connections, which may not clear until 2035, is casting doubt on its ambitious £2.5 billion plan to develop data centres across the UK.
This development is particularly concerning for Labour, which sees large-scale data centre projects as key to implementing Sir Keir Starmer’s strategy to integrate artificial intelligence (AI) into public services and stimulate economic growth.
The situation undermines recent governmental efforts to streamline civil service operations by leveraging digital and AI technologies, aimed at reducing the governmental footprint.
Microsoft has highlighted that the feasibility and scheduling of their proposed data centre projects in Wales and Northern England hinge on timely access to the grid, as communicated by the National Grid.
The uncertainty has been exacerbated by a recent surge in speculative renewable energy projects, leading to a halt on new grid access applications in January after an inundation of submissions overwhelmed the system.
A Microsoft spokesperson outlined the stakes involved: “In November 2023, we announced a £2.5bn investment to expand our next-generation AI data centre infrastructure in locations including London, South Wales, and potentially a new area in the North of England, expected to bring over 20,000 advanced graphics processing units to the UK by 2026.”
“The success of these regional expansions will rely heavily on the availability and reliability of power supply to these sites.”
To mitigate these challenges, grid operators are now prioritising projects that already have planning permissions and land rights, moving away from the previous first-come, first-served system.
Microsoft has secured planning permissions for several sites, including the former Eggborough and Skelton power stations in North Yorkshire and a new facility in West London, indicating some progress in this area.
The company remains hopeful that ongoing reforms to the energy connection process will align with their investment timelines. These concerns are shared by other data centre developers, such as David Sleath of Segro, who noted that grid connection issues are a significant barrier to further investment.
The Government is also exploring the creation of “growth zones” that would offer expedited planning permissions and grid connections to facilitate these types of large-scale investments.
Labour’s recent unveiling of an “AI opportunities action plan” includes proposals for AI growth zones and an AI energy council, co-chaired by Ed Miliband, the Energy Secretary, and Peter Kyle, the Technology Secretary.
As demand for electricity surges, partly fuelled by the energy-intensive nature of AI technologies, the National Grid anticipates that the power consumption by data centres could increase sixfold over the next decade.
This burgeoning demand places additional pressure on the UK’s power infrastructure, already grappling with some of the highest electricity costs among comparable nations, as noted by the House of Commons’ public accounts committee.
