What is the UK government's approach to the development challenges for data centres?

Demand for data centres has grown exponentially in recent years, driven by the growing popularity of cloud-based infrastructures, data-driven businesses and the use and deployment of AI systems. Data centres produce an estimated £4.6bn in revenue each year in the UK (2021) and are forecast to support a UK tech sector worth an additional £41.5bn and 678,000 jobs by 2025.

Data centres – planning and policy issues

The UK government has recognised the economic and technological importance of data centres. However, despite being a key element of digital infrastructure, deployment of data centres to match growing demand has faced a number of hurdles, in particular:

• Policy vacuum – data centres are rarely referenced in planning policies, and are currently absent from the National Planning Policy Framework (NPPF) and associated guidance, which has resulted in inconsistent planning decisions.
• Location – data centres are often large schemes that need to be connected to nearby infrastructure. Planning decision-makers often struggle to balance the growing need for data centres against existing policy concerns, such as the protection of the green belt.

How is the government looking to tackle these issues?

In July 2024, the new government launched a consultation on proposed reforms to the NPPF which invites responses to the proposed changes by 24 September 2024.

Among other key proposals relating to housing and energy infrastructure, the consultation highlights the significance that the government is placing on digital infrastructure (including data centres), and recognises the commercial opportunities resulting from such infrastructure for the UK economy and for levelling-up investment across the country.

In particular, the consultation proposes the following changes to the NPPF:

• Implementing a positive expectation that suitable sites for digital infrastructure projects (including data centres, laboratories and gigafactories) are identified by planning authorities in local plans and supported in decision making, ensuring that the planning system meets the needs of a modern economy.
• Allowing digital infrastructure development proposals to opt into the Nationally Significant Infrastructure Project regime, which should give greater certainty in decision making and support development within parts of the green belt (that is, in so-called "grey belt" zones).

If implemented, the expectation is that the UK's planning system will better support data centre proposals which will contribute to the UK's economic and infrastructural priorities.

Interplay of energy strategy with digital infrastructure

While the increased opportunities for data centre development is positive news for those in the data centre industry, the challenge of ensuring the availability of sufficient power remains.

Data centres are energy intensive in their operation, in large part due to running their computer systems and the cooling requirements to maintain functionality. The data centre industry is rapidly developing means of improving energy efficiency – and therefore reducing the net impact on carbon emissions – and investing in alternative and captive energy solutions in order to alleviate energy grid constraints. Nonetheless, data centres generally need to be sited close to reliable, high availability power sources in order to ensure maintained operation, which often results in data centres being located close to major urban centres. As such, an increase in brownfield and grey belt development opportunities is a positive step.

The UK government has adopted a net zero strategy, by which it aims to reduce all UK emissions to zero by 2050. The government's NPPF consultation also focuses on the need to revise the NPPF to improve support for more green and renewable energy schemes, including solar and onshore wind schemes.

While the government's proposals indicate that there may be increased opportunity for data centre developments in brownfield and grey belt sites, the significant power required for the development and operation of these  projects will present a further challenge for the net zero strategy. This will necessitate additional alternative energy supply (such as onshore wind and solar) and even greater focus on grid stabilisation and upgrade to allow for sufficient and dependable power supply. The NPPF consultation should therefore identify new opportunities not only for data centre operators and their customers but also for data centre and energy developers across the country.