1. What are the challenges I might face when trying to a develop data centre in England or Wales?

• The UK’s infamously sclerotic planning system is a critical hurdle for any project developer to overcome. Fortunately, successive governments, including the current administrations in England and Wales, have been working overtime to untangle the gordian knot and smooth the path for major infrastructure to secure more expeditious consent.  
• Data centres’ power requirements may also soon become one of the key barriers to growth in the sector. The UK Government has published preliminary estimates that there was 1.6GW of data centre capacity in 2024, and this could increase to between 3.3GW and 6.3GW by 2030.  With the development of AI and the additional computing power required to service that technology, that need could be greater than anticipated. The problem comes from meeting that demand.
• British electricity transmission infrastructure is under significant pressure at present, and in certain areas there is a risk of the system reaching a point of network constraint (where additional power cannot be added to the grid because it is already at capacity). Network operators will not be able to provide new connections for supply of that constant, “firm” power without undertaking significant reinforcements or upgrades.  This can pose a significant barrier to development for data centres with high power demands, and the high demand for new connections at present is resulting in projects receiving offers for connection dates into the 2030s. 
• Additionally, with increasingly common seasonal water-stress, particularly in southern England, data centre developers may need to consider alternatives to drawing potable water from the public supply when designing their project. This may be through looking closely at the efficiency of the cooling design, including on-site water storage systems, installation of flow restrictors, or considering non-potable water sources. 

2. How are England and Wales addressing the challenges of power supply and the planning process?  

• The plan to address electricity network constraints forms part of the Department for Energy Security and Net Zero’s Clean Power 2030 Action Plan, and involves an “ambitious” acceleration of the development of new transmission and distribution network infrastructure and grid reinforcement. Significant focus is being brought by transmission and distribution networks, the electricity regulator Ofgem, and the UK Government to deliver on this, and the National Energy System Operator has confirmed that 80 transmission projects are in strategic network plans, and there is an acknowledgement from the UK Government that these will need to be delivered quickly. 
• For data centre developers, this policy change and long-term promise of improvement is not necessarily sufficient to bring forward new projects in the short to medium term on its own. As a result, data centre developers are becoming creative in finding solutions to this problem; some developers are looking for gas connections, with the intention to build local gas to power plants to fuel their developments; other developers are considering sourcing electricity directly from generators and locating their projects close to the source of that supply, using a private electricity network to channel that power into their facility. A major investment announced alongside the UK-US Technology Prosperity Deal included new advanced data centres to be developed and powered by small modular nuclear reactors. 
• In England and Wales, the Government has confirmed that it is proceeding with proposals to enable data centres to be considered under the development consent order process. Where applicable, this will provide for decision making to be taken away from local officials, and taken by an examining authority which reports directly to government.  Moreover, suitable sites for data centre development are often located on the outskirts of major cities which have ‘Green Belt’ designations – steering decisions away from granting development which risks impacting the openness of these areas.  For ‘Green Belt’ land of lesser intrinsic value, the government has recently forced through policy amendments which weaken the stultifying effect of the designation so long as schemes deliver suitable local infrastructure improvements.  
• Additionally, the UK Government is creating AI Growth Zones (AGZs) where the principle of development is secured by an order, with then only details of individual schemes to be approved at a later date.  There is an application process for AGZs, and areas must demonstrate compliance with a number of conditions (including in respect of power, land, water and connectivity availability). To date, AGZs have been announced for sites in Oxford and near Newcastle, and the application process is intended to remain open.

3. What other changes could be made to help the data centre industry grow and stay competitive in England?

• It is anticipated that the UK Government will further strengthen its national planning policy to underscore the importance of development which contributes to the data economy.  Whilst policy encourages local decision makers to facilitate data centre development, a clear suite of policies which better guide decision makers at the local and national level in determining planning applications for data centre development would undoubtedly provide increased certainty for both developers and funders.  
• In addition to advances in planning policy, the UK Government announced it would introduce a “connections accelerator service” by the end of 2025, intended to help demand projects (such as data centres) get grid connections, and allow them to progress their project’s development on a shorter timeframe than currently possible. 
• There may also be opportunities for reducing electricity prices for data centre developers.  The Government’s Modern Industrial Strategy (June 2025) committed to introducing a scheme to reduce energy costs for eligible businesses. While this scheme is due to launch in 2027 and the rules are yet to be published, if data centres are eligible for this support, that could support an investment case for new developments. This is certainly something data centre developers will want to keep tabs on.