As the UK government drives forward with its science-and-technology based growth agenda, data centres are at the forefront of the future UK economy. But as other countries around the world have found, it’s crucial to manage the balance between data centre growth and the UK’s drive for low-carbon energy independence.
The challenge
In January 2025, the UK government introduced its AI Opportunities Action Plan. The technology is viewed as central to the country’s future growth. As Peter Kyle MP, Secretary of State for Science Innovation and Technology, noted at the launch: “Across government, we have already taken decisive action to support the AI sector and take down the barriers to growth.”
The removal of barriers is particularly focused on data centre developments. While the government acknowledges that the UK does not need to own or operate all of the computational power (referred to as 'compute’), it notes that: “Countries that enable the build-out of AI infrastructure will reap benefits through increased economic growth, the reinvigoration of former industrial sites and ownership of critical assets.”
We have already seen the results of this policy, with the UK declaring data centres as ‘critical infrastructure’. Deputy PM Angela Rayner has stepped in to sweep aside objections to new data centres. And Chancellor of the Exchequer Rachel Reeves announced plans to tackle ‘slow planning systems’ to support data centre developments.
The UK is already the third-largest data centre market in the world, with just under 500 data centres in the country. With robust government support, we are already seeing new developments springing up:
* DC101’s AI data centre in Hertfordshire which will be Europe’s largest data with 2 million sq ft of space
* Latos Data Centres has secured planning permission for a 500,000 sq ft data centre in Cardiff
* The Humber Tech Park in Lincolnshire will be one of the largest data centres in Europe
But with data centres spearheading UK growth, we must consider the impact on the national energy infrastructure and supply. Data centres are significant energy users and globally, their growth is widely acknowledged as impacting on local supply as well as national carbon reduction goals.
At the end of 2024, the International Energy Agency (IEA) raised concerns about the rise of AI data centre investment and development and its impacts on electricity demand. The UK is not alone in regarding AI as a pathway to economic growth. Global annual investment in data centre construction has doubled in between 2022 and 2024.
In 2023, overall capital investment in data centres was higher than that of the entire UK oil and gas industry.
What’s more, today’s hyperscale data centres use significantly more energy than their predecessors: 100 megawatts (MW) rather than 5MW to 10MW in ‘standard’ data centres, according to the IEA.
Learning from others
We can see the potential impact of this challenge in many countries around the world. For example, in the early 2000s, Ireland took the route of encouraging data centre growth to boost its economy. The government offered tax incentives for developers and operators, and Ireland’s position as a node for undersea data cables made it an attractive proposition.
These policies proved successful in attracting developments to the country.
There are around 90 data centres in Ireland (figures vary) most of them centred around Dublin. However, over the years, the energy use of data centres has grown to such an extent that it is causing problems in grid balancing, energy security and the country’s carbon reduction goals.
Ireland’s attractiveness as a home for many data centres has seen its electricity demand grow at the second fastest rate in the EU, according to research from University College Cork. In 2015, data centres used 5% of Ireland’s electricity and in 2023 that had risen to 21%.
The research also shows that without data centres, Ireland’s electricity demand would have seen ‘minimal growth’ between 2015 and 2025. Now, the projection is that by 2030 data centres could use more electricity than Ireland’s entire industrial sector.
This is now leading to push back on new data centre developments. For example, in February 2025, Dublin refused planning permission for a data centre because the proposal included an on-site gas-powered generator. The carbon footprint of this approach was considered too large to be acceptable.
However, the gas generator was only included in the plan because the developer had not been able to secure an electricity supply to the site.
It’s a story that reflects the crucial link between data centres and energy. And the UK needs to pay attention to the lessons that our close neighbour has learned over the past decade.
Data and energy – two sides of the same coin
The UK is already the third largest data centre host with around 514 data centres. The USA has around 5,300 and Germany 521. Further growth of the UK sector requires parallel developments in energy infrastructure.
This has been recognised in the government’s plan for AI Growth Zones. This strategy, launched in early 2025, has opened bidding from local authorities to establish themselves as growth areas for data centres or as the government puts it: “To become dedicated hotbeds for AI infrastructure development”.
One important factor that the Growth Zones policy is that in selected areas, the government will accelerate planning permission to build the AI infrastructure and energy connections, including scaling each zone to 500MW supply capacity.
This means that sites being prioritised will already have that energy capacity of 500MW or have plenty of deindustrialised areas with land and infrastructure ready for development. This includes the space for energy infrastructure including nuclear reactors, solar stations and wind farms.
Culham Campus in Oxfordshire was selected as the first of these AI Growth Zones. It is already home to the UK Atomic Energy Authority where it is working on developing the UK’s first fusion energy centre. There has also been interest from sites in the North East and North West of England as well as Scotland.
However, access to energy is not the only factor that must be considered. The source of that energy is equally important.
Data centre developers and operators are acutely aware of their environmental impact. The big names in the sector including Microsoft, Amazon AWS and Google have established sustainability goals, including carbon reduction, and this is putting access to low-carbon electricity high on the agenda for their choice of sites for new developments.
A February 2025 report from the Social Market Foundation* highlights the issue of providing low-carbon electricity for this energy-hungry sector: “Electricity grid constraints, high electricity costs, and lack of low-carbon energy alternatives make the UK less competitive.”
Furthermore, the SMF notes that UK electricity prices are four times higher than those in the USA and 46% above the median price across the 31 member states in the International Energy Agency. To reduce those prices, the UK must produce more of its own electricity and shift the burden of green subsidies from electricity (where they currently reside) over to gas.
The result of these developments means that the UK’s low-carbon energy future and its AI growth ambitions are entwined. We cannot attract future data centre developments without ensuring we have the energy to power them in the long-term; and at the same time we must ensure that affordable energy supplies are based on sustainable generation from wind, solar and nuclear.
The future for data centre developments
There can be little doubt that data centre developments will be a major source of work for the UK construction industry over the next five to ten years. Predicting the location of this work should be relatively straightforward as the government announces more AI Growth Zones.
One other important factor for data centres is energy efficiency. Optimising energy performance is vital to meet sustainability goals and to help host regions meet those energy needs more effectively. As a result, we are likely to see a strong focus on efficient cooling technologies (around half of the energy used by data centres is for cooling).
Another trend that is already underway is linking data centres to local heat networks. While widely used in countries such as Norway and Finland, this approach is in its infancy in the UK. Linking data centres to heat networks to make use of rejected heat would support the government’s other important goal of decarbonising heat in UK buildings. Currently only around 2% of heat is supplied from networks but the national objective is to raise this to 18% over the next decade.
Along with opportunities in low-carbon heat and cooling, we should also see growth in energy infrastructure projects, which will have to be fast-tracked to keep pace with data centre growth. In fact, they must go hand-in-hand to achieve successful delivery of these key government objectives.
Where we have seen fast-track planning for data centres, we can also expect steep acceleration of development of renewable energy projects – and their connection to the grid. This has been a source of massive delays, but the government is now laser-focused on cutting down on red tape to get these projects underway and supplying much-needed low-carbon electricity.
If the government can manage the balance between AI growth and sustainable energy generation, the UK’s move towards an AI economy could pull us along the road to affordable low-carbon power even faster. But we must learn from the experience of others and avoid the race to a high-tech future without building a robust energy supply to support it.