The UK is at a crossroads: a booming data centre industry is poised to redefine the digital economy, yet grappling with planning bottlenecks, grid challenges and a surging demand for clean energy.
A record-breaking year for investment
The UK’s digital economy is set to boom, as data centre firms and infrastructure investors, including Blackstone, Amazon Web Services, Cloud HQ and CoreWeave pledged to invest a combined £25 billion in the next three to five years in new facilities, including a 1.1GW hyperscale site in Blyth, Northumberland. This year could also bring further announcements in data centre infrastructure, as developers race to meet soaring demand for these critical assets.
Addressing planning bottlenecks
The Government’s decision to classify data centres as Critical National Infrastructure (CNI) is a step towards recognising the crucial role of what are seen as the building blocks of our digital economy. Data centres are also gaining formal recognition at the national policy level, through the publication of the National Planning Policy Framework (NPPF).
Under the NPPF (revised on 12 December) planning policies and decisions should recognise and address the specific locational requirements of different sectors. This includes making provision for “clusters or networks of knowledge and data-driven, creative or high technology industries; and for new, expanded or upgraded facilities and infrastructure that are needed to support the growth of these industries (including data centres and grid connections)”.
Planners should also set criteria, and identify strategic sites, for local and inward investment to match the national industrial strategy helping to align local developments with the needs of a growing digital economy.
There are many areas across the UK that are well-suited for data centre developments. A planning framework that harmonises these processes and incentivises sustainable designs will help ensure the industry grows responsibly while meeting critical infrastructure needs.
Grid connection shortages
Recently, the CEO of Segro, landlord to the largest concentration of data centres in the UK, stated that access to power is the single biggest constraint encountered by new data centre developments.
The demand for hyperscale data centres will only increase demand for grid connections. In west London, for instance, the electricity grid is already at full capacity, forcing developers to explore alternative solutions like funding new substations—an expensive and inefficient option which potentially delays developments by a number of years. However, not all new data centres need to be located near London. Scotland, for example, offers cleaner power and greater grid availability, making it a natural candidate for hosting hyperscale facilities.
Reforming the grid connections process is essential to unlock investments in data centres, industrial electrification, and housebuilding—key drivers of economic growth and the UK’s journey to net zero. Recent government promises to prioritise clean power and critical infrastructure, including data centres, are a welcome step toward enabling timely connections and unlocking billions in investment.
In its clean power action plan, published on 13 December, the Government has promised that a clean-up of the dysfunctional grid connections process will not only prioritise the projects needed to connect as much clean power as possible but will mean crucial infrastructure projects from housing to data centres are prioritised and receive grid connections, helping to unlock billions in investment and grow the economy.
Scotland: hosting the hyperscale boom
Hyperscale facilities, used by the major cloud providers, like Google, Amazon Web Services and Microsoft, are an essential component to providing Cloud and AI/ML services such as Gemini and Chat-GPT. With the increased adoption of these services, it is now not uncommon for 100MW+ or even GW facilities
With new housing, clean energy and other infrastructure all competing with data centres for scarce grid connections around London, hyperscale developers need to consider other locales. Scotland stands out as a compelling alternative. With access to abundant renewable energy—often producing more than it consumes—and grid availability, it offers unique advantages. BNEF found that in 2024 the UK’s grid operators spent more than £1 billion to pay wind farms – many of them in Scotland – to curtail output because of grid constraints.
Over the next 10 years, Scotland aims to connect 40GW of offshore wind to the UK grid by 2035, more than the UK’s entire offshore wind fleet today (14GW). It is a huge task for grid expansion to keep pace.
Hyperscale data centres have the power demand to absorb renewables output. Mads Nipper, chief executive of Danish offshore wind developer Orsted, has reportedly said that data centre growth projection is exciting because it represents a “very high” growth in demand, while leading players in the industry that are committed to the transformation of the industry’s footprint could lead to a “very targeted” increase in renewables.
An updated shortlist published in 2023 for data centre site development, produced by Scottish Futures Trust/Host in Scotland, Crown Estate Scotland and Scottish Enterprise, highlights 20 sites in Scotland suitable for hyperscale as well as some colocation data centres, many of which are in close proximity to the ScotWind offshore wind projects bringing power to shore as well as large-scale onshore renewables schemes of +100MW.
Scotland’s renewable potential doesn’t stop at wind. Hydropower and battery energy storage offer clean, reliable solutions for balancing intermittent renewables, ensuring data centres have steady, decarbonised power.
Beyond cities
A lack of available power in European metro markets is expected to inhibit the growth of data centre providers, according to the CBRE. While the European data centre market continues to grow across Frankfurt, London, Amsterdam and Paris (FLAP) markets, supply shortages will continue to persist and power sourcing remains a key challenge.
There are plenty of benefits to locating data centres outside of densely populated areas and overstretched grids. In rural or coastal locations, wheregrid constraints are less severe, data centres can benefit from abundant renewable energy sources and lower cooling costs due to cooler climates. These advantages provide a solid starting point for building greener, more efficient facilities.
2025: embrace green growth opportunities
Growth of the digital economy cannot occur at the expense of climate change. It makes increasingly less sense to site modern data centres with their bigger power demand around major cities. Data centre developers have access to proven technologies to build green facilities, with innovations that span energy-efficient cooling systems to UPS batteries capable of sharing energy with the grid at times of constraint, as pioneered by Microsoft in Ireland.
Our Government wants more data centres, including hyperscale facilities, to be built in the UK to ensure data security. It also sees renewable energy as one of the means to achieve greater energy security and cheaper bills. In the right locations, data centres can thrive on clean power while flexibly adjusting their energy consumption, contributing to a sustainable and resilient grid.
Adopt a multi-stakeholder approach
To make the most of this exciting opportunity, the UK Government, including its devolved powers, should focus its energy on facilitating cooperation between stakeholders, including the data centre industry, local government, planning policymakers, NESO and distribution system operators, to ensure that data centre growth can be harnessed in locations where clean power is abundant but also to ensure that local communities fully benefit from the positive societal impacts.
Lessons from the renewables industry are key. Offshore wind has transformed port cities along Scotland’s east coast and England’s north-east coast by creating jobs, boosting training opportunities, and revitalising local economies.
