18 Jan 2023
Back in July 2022 the Greater London Authority (GLA) wrote to the electricity distribution and transmission network operators Scottish & Southern Electricity Networks (SSEN), National Grid Electricity Transmission (NGET) and National Grid Electricity System Operator (NGESO) regarding the issue of insufficient electricity network capacity and delays to connection applications in west London.
SSEN is the distribution network operator across west London including Ealing, Hillingdon, Hounslow and Slough, and it is to SSEN’s network that any new data centre or residential development in the region will need to connect. The GLA document, West London Electrical Capacity Constraints, was also sent to 86 developers with an accompanying questionnaire about their developments and their progress in the context of the capacity constraints.
The GLA had been made aware by house builders of significant delays, sometimes of eight years or more, to secure the electricity network capacity required for new developments. In their document, West London Electrical Capacity Constraints, the GLA cited a rapid influx of applications for connection from data centre developers in west London as being part of the issue.
The GLA described data centres as using “large quantities of electricity, the equivalent of towns or small cities.” That’s an unhelpful start. It’s of course true that data centres rely upon steady, secure electricity supply at volume and a good-sized data centre can use around 50GWh of electricity annually. Compare that to a local authority near me, Stevenage, an industrial and commercial town of 87,000 people, which as a whole consumes 350GWh pa, that’s seven times the use of a large data centre. The same comparison could be made of any large scale industrial or commercial facility. An out of town hypermarket can use around 5GWh pa, and a brewery can use around 20GWh pa. Managing our data and enabling our technology is just as essential as food and beer right?
On the back of the GLA communication the media picked up the story and the FT eagerly reported “West London faces new homes ban as electricity grid hits capacity” suggesting that new developments would be banned until 2035. Let’s be clear, there is no ban on new housing developments in west London but that didn’t stop the criticism continuing, including the Telegraph referring to data centres as “energy vampires”. The GLA later confirmed that their document didn’t imply a ban on future housing and techUK followed up by saying, “The operators we represent welcome this clarification which dispels the adversarial framing in favour of one of cross-industry collaboration.”
As those in the industry will know, Slough and west London are the second largest data centre market on the planet by size, at around 800MW, second only to Ashburn, Virginia at around 1,700MW, with the Ashburn usage set to increase to beyond 2,000MW before too long. Both locations are ideally placed to access the fibre optic networks that cross the Atlantic and are in close proximity to their clients who demand high speed digital services. They are also key locations for the world’s hyperscale customers with self-created availability zones within these regions that drive enormous supply chains around them. So, in such an important region for the UK technology sector we shouldn’t be seeing potential shortages of electricity network capacity. It isn’t an understatement to say that if we don’t create the network capacity to continue to welcome data centres to the region there is a very real risk that the sector stagnates in west London and data centres find a new region - or even country - in which to invest.
Maybe an indication of this potential shift came at the end of last year when a proposal was published for the creation of what could be the largest data centre campus in Europe, a 600MW facility on a 500 acre site, not in west London, but in Havering in east London. It’s early days but if it does go ahead it will create nearly 10,000 jobs and represents an inward investment of over £5bn, larger than the inward investment in the Thames Tideway Tunnel, The Shard, Wembley Stadium, and the Northern Line Extension. The only bigger recent inward investment was the 2012 London Olympic and Paralympic Games. Importantly for local authorities, the investment will represent a multi-million pound uplift in business rate receipts and west London should be competing for that, if only it had the electrical capacity.
While a shortage of capacity for data centres is untenable, and it will limit the growth of the sector, it is equally untenable that house builders can’t access the capacity they need. Building new homes has been a political football for years and there has been a chronic undersupply of new homes, including new affordable homes, for decades. The UK Government has a stated ambition of 300,000 new homes every year but that target hasn’t been met since the 1960s, although it did reach a recent peak of 243,000 new homes in 2019/20. The problem with the supply of new, affordable homes isn’t a new one, as a nation we were already failing, but a shortage of electrical capacity exacerbates the problem.
Following the GLA communication Hillingdon Council took the somewhat unusual step of making a public statement, perhaps keen not to alienate the data centre sector in their own authority. Councillor Eddie Lavery, Hillingdon Council's Cabinet Member for Residents' Services, said, "This is a somewhat scaremongering story which has blown the reality of the situation out of proportion. We're not aware of any housing schemes planned for the borough being affected. There is also evidence that power capacity has been reserved for developments that may never take place and this latent capacity should be made available to schemes that will be delivered. We understand the GLA is working hard to resolve the situation as quickly as possible, in the meanwhile we have every confidence we'll be delivering on our housing promises."
The Councillor makes a good point, if there is unused capacity across all sectors, then that needs to be reviewed and the unused capacity made available to the market. It is true that data centres can forecast their consumption better than most and will apply for connections and capacity to match their growth, and some of that capacity will remain unused. Presumably Councillor Lavery will be pleased with the response to the GLA from the network operators, who are proposing exactly what he suggests as one of the solutions to the problem.
While the data centre sector should ensure they don’t unnecessarily sit on unused capacity, it is equally the responsibility of house builders to improve the energy efficiency and energy independence of their housing stock, a view expressed by Jo-Jo Hubbard, the CEO of Electron, who wrote in the FT, “Housing developers could invest some of the money that they would otherwise spend on securing network capacity on solar panels, batteries and energy asset control systems. This would enable new developments to connect faster, use the grid while it was available and contribute flexibility services, or even excess renewable energy, back to it at times of shortages.” Hubbard goes on to say, “Developers of new, fully electrified homes can give back to the grid rather than experiencing it as a block for construction in certain areas. This approach not only saves on network reinforcement costs for all energy bill payers, it also gets us to net zero faster.”
In September the network operators wrote back to the GLA with a series of immediate commitments in response to the stated areas of concern.
The response from SSEN, NGET and NGESO said, “Following careful consideration of the technical situation, [we] have jointly agreed on an innovative approach that would allow smaller demand customers, such as many of the house building companies, in west London to connect to our network. The work we have jointly undertaken with the GLA has helped to gain greater visibility of the pipeline of housing projects planned for west London over the medium to longer term.”
In the response SSEN admits that it has indeed seen an influx of higher volume requests and has accepted 18 connection requests over 10MW, which represents a total capacity equivalent to 260,000 new homes. The accepted requests are combined with 443MW of contracted connections to the transmission system, which has triggered necessary upgrades and reinforcements to both the transmission and distribution networks, which can be long term projects.
The great news for house builders is that the networks have committed that any development under 200 new homes (1MVA) can connect at the distribution level without a requirement to be assessed at the transmission level. If a project exceeds that it can also go ahead provided that it doesn’t ramp up at more than 1MVA pa, good news for sites with phased development. The networks have also agreed to meet monthly to review the technical situation and to develop fast solutions where required. This approach should enable the majority of housing to avoid the long timescales associated with transmission reinforcement.
The networks are now assessing the connections queue to identify allocated capacity that is not progressing to connection and are terminating connection offers where possible and releasing that capacity back to the network. So far SSEN have removed over 200MVA of connection requests from the contracted queue.
SSEN are also engaging with developers to understand their buildout plans and when they will reach full capacity, which will help the networks to forecast demand and facilitate connections. Alongside that SSEN are revising their queue management process and may be able to enable smaller projects where there is headroom available, even if those projects are behind larger schemes requiring transmission upgrades.
The final short term solution is an amnesty on unused capacity. SSEN are engaging with large connected clients to understand their actual capacity requirement as opposed to their contracted capacity. If connected clients can release capacity back to the network they will see a reduction in distribution network costs, so it makes sense from both sides.
The networks are also pursuing medium and long term initiatives to help ease the situation and these include; faster upgrades to the transmission network, use of flexibility services to increase generation or reduce consumption on a very short term basis, enabling the connection of batteries, and greater understanding of the strategic investment landscape.
In response to the original questionnaire that was sent to developers, by the end of September the GLA had received information about 52 separate developments. Of those developments 14 (a total of 14,500 homes) were not at a sufficiently advanced stage to know their capacity needs, 19 already had capacity secured (13,000 homes) and 19 were awaiting confirmation of connection (5,300 homes).
As with lots of relationships, it’s complicated, and assigning blame doesn’t help the situation.
The technology sector continues to grow and our collective appetite for high speed digital services is unabated and as a result data centres have continued to be developed in proximity to the high speed fibre optic network. Of course this growth increased exponentially during the COVID-19 pandemic. The electricity networks have medium and long term plans to develop and upgrade their networks and the growth of data centres has outstripped that plan. The queueing system for processing connection applications was too simplistic for the current situation and the networks develop their network based on demand.
While the immediate actions by the network operators will help ease the constraints for house builders it won’t help data centre developers who will need much more capacity to ensure the sector can continue to grow, and that will take time, years in fact. If a business needs rack capacity in Slough or west London they’d be well advised to secure it sooner rather than later or they risk getting caught without capacity and waiting for electricity network upgrades to be completed.
I think we can say that the intervention by the GLA has been positive. The stakeholders engaged, some short term solutions have been developed, and the discussion about the infrastructure requirements in the region has been taken to a more strategic level. The longer term problem still exists, but the networks will develop additional capacity, and in the meantime most housing developments can go ahead.
Of course the power bottleneck in Slough and west London does increasingly open the door for new up-and-coming data centre hubs around the east and north of London - the Havering project previously mentioned being one long-term example, and in the short-term my blog hosts, Kao Data, have the potential to expand their already operational data centre campus in Harlow beyond 80MW should industry murmurs of a potential new availability zone on the east side of London become active.
As a region, and as a nation, we need a more strategic approach to the development of critical infrastructure that is compatible with the need to increase house building to meet and exceed government targets and that is planned in conjunction with the electricity network operators. One thing is clear to me though, data centres most definitely are not to blame for a chronic housing shortage that already existed.