Power, Planning and Public Support: The Data Centre Covenant Explained
The Government’s new Data Centre Covenant marks an important development in the UK’s approach to data centre delivery.
It also reflects a wider challenge facing the sector. Data centres are increasingly recognised by Government as critical infrastructure underpinning AI, digital services and economic growth, but that strategic importance is not always reflected in public perception. At a local level, proposed developments can instead attract concerns around significant electricity and water consumption, pressure on local infrastructure and whether they will create sufficient long-term local benefits.
That matters because the Government estimates that the UK will require 6 GW of AI data centre capacity by 2030. Delivering that scale of infrastructure will require not only land, power and planning permission, but also public and political support for development. The Government acknowledges this directly, stating that the UK will only succeed in building the compute capacity it needs if communities can see the benefits of development.
Against that backdrop, the Covenant establishes what is effectively a new bargain between Government and the sector.
Developers are being asked to demonstrate more clearly the benefits data centres can provide to the energy system, local communities and the wider UK economy. In return, strategically important projects may receive greater Government support in overcoming some of the barriers currently preventing or delaying development, particularly around power and planning.
So, what does that bargain look like in practice, and what do developers need to know?
Who does the Covenant apply to?
The Covenant contains five tests which all data centres are encouraged to meet. Projects designated as strategic will need to satisfy them to qualify for additional government action.
However, the Government has not yet published the definition of a “strategic” or “exceptionally strategic” data centre, or the additional criteria that will be used to assess projects. Meeting the five tests does not, by itself, guarantee strategic designation or access to government assistance.
Developers will therefore need to monitor the further criteria when they are published and should not base a project’s delivery strategy entirely on an assumption that strategic status will be obtained.
What are the five tests?
1. Responsibility for energy-system costs
The Government’s starting point is that data centres should bear an appropriate share of the energy costs their demand creates, rather than those costs being passed to households, communities and other businesses.
Developers will also be expected to make credible commitments in respect of the grid capacity they request and to support clean power, security of supply, flexibility and the efficient operation of the electricity system.
This reinforces the pressure on developers to demonstrate that the capacity sought is supported by a genuine and sufficiently advanced project.
2. A visible contribution to host communities
This is perhaps where the public-perception issue comes through most clearly.
Strategic data centres will be expected to agree a Local Benefit Plan involving substantial investment in their host community. The investment is to be linked to the scale of the development, with the community having a meaningful role in shaping how those benefits are delivered. The Government suggests that funding could support matters such as local transport, parks and town centres.
Importantly, that investment is intended to be additional to the developer’s existing responsibilities under section 106 agreements and the Community Infrastructure Levy.
That potentially changes the conversation around community benefits. For strategic developments, it may no longer be enough simply to mitigate the planning impacts of a project. Developers may increasingly need to demonstrate a positive and visible contribution to the place in which the data centre will operate.
The detail will be important. Questions remain around how Local Benefit Plans will be documented, monitored and enforced, and how they will interact with conventional planning obligations.
3. Efficient use of energy and water
New facilities should be designed to achieve a Power Usage Effectiveness (PUE) of 1.3 or better and minimise reliance on public water supplies, including through technologies such as closed-loop water systems.
Developers should also design projects to enable the capture and reuse of waste heat where there is a viable local user. Strategic facilities will be expected to report annually on matters including energy and water use, efficiency, emissions, heat reuse and participation in flexibility services. Existing operators will be encouraged to report on the same basis.
Again, there is an important public-perception dimension. Electricity and water consumption are among the issues most readily associated with data centre development. The Covenant increases the emphasis on developers being able not only to address those impacts technically, but also to demonstrate how they are being managed.
These issues also need to be considered early. Heat reuse, for example, depends on the availability and proximity of a viable heat user and the infrastructure and commercial arrangements required to deliver that heat. How this will interact with the Heat Network Regulations will be one to watch.
4. Employment, skills and domestic capability
The Covenant expects developers to support good-quality employment extending beyond the construction period, recruit locally where possible and invest in apprenticeships and relationships with colleges and universities.
Projects should also strengthen important UK supply chains and support collaboration with British researchers and technology businesses. Those regarded as the most strategically important will be expected to contribute to the development and deployment of British AI hardware.
This is particularly relevant to the debate around the local economic contribution of data centres.
Developers may increasingly need to articulate the benefits of a project in broader terms than the number of permanent jobs within the completed facility. Construction employment, apprenticeships, skills investment, supply-chain opportunities and the wider economic activity supported by access to computing capacity may all form part of that story.
5. Security and resilience
Data centres should provide secure and resilient UK access to computing capacity required for critical services and national priorities.
Operators will be expected to work with relevant public authorities, including the National Cyber Security Centre, share appropriate information, plan for disruption affecting critical supplies and participate in Government resilience exercises.
The focus on domestic capacity reflects the growing importance of data and AI infrastructure to public services, national resilience and the wider economy.
What is the Government offering in return?
This is the other side of the bargain.
A new Ministerial Control Centre, chaired by the new Minister for AI, will consider actions to support strategic data centres. The Government intends to use this mechanism to address delays affecting power and planning for the most important projects.
Potential electricity-connection measures include:
- reserving future network capacity for strategic projects;
- reallocating capacity released when other projects leave the connections queue;
- identifying locations where capacity may be available before 2030;
- facilitating the transfer of existing pre-2030 data centre connection contracts; and
- permitting temporary on-site generation in tightly controlled circumstances.
Temporary generation is intended to be a limited measure, available only to exceptionally strategic projects where the other measures cannot provide the required capacity in time and subject to conditions including the protection of energy security.
The Covenant also sits alongside wider reforms affecting developer-built connection infrastructure, flexible connections, operational controls and the proposed data centre commitment fee.
For developers, these measures could be significant. Access to sufficient power within a commercially useful timeframe can ultimately determine whether an otherwise attractive site is genuinely developable.
However, they should not be regarded as a guaranteed route to an accelerated connection. The assistance remains dependent on strategic designation, further policy detail, technical assessment and the applicable regulatory framework.
What should developers be doing now?
The immediate task is not simply to decide whether a project can formally satisfy each of the five tests.
Developers should consider how the overall development strategy responds to the concerns behind the Covenant, including:
- whether the amount and phasing of requested grid capacity can be properly substantiated;
- what benefits the project can provide beyond ordinary planning mitigation;
- how a Local Benefit Plan might be funded and delivered;
- whether energy, water and heat-reuse objectives are incorporated sufficiently early into the design;
- what lasting employment, training and supply-chain opportunities can realistically be offered;
- how security and resilience requirements affect the operational model; and
- how commitments made in support of the project will be documented and delivered.
In other words, these issues should increasingly be considered from site selection and project design onwards, rather than treated solely as a planning or ESG exercise later in the development programme.
The bigger picture: public perception and the social licence to develop
Perhaps the most important message from the Covenant is that public perception can no longer be treated as separate from development strategy.
The Government wants significantly more data centre capacity to be built in the UK. This is not simply about supporting economic growth or the expansion of AI. As the Data Centre Covenant makes clear, it is also about sovereignty and resilience. As AI and data become increasingly important to the NHS, defence and other critical services, the Government does not want the UK to be overly reliant on computing infrastructure located overseas.
But achieving greater data and AI sovereignty requires physical infrastructure to be built somewhere. And the national case for that infrastructure does not automatically translate into local support for individual developments.
A community considering a new data centre may understandably ask why its area should accommodate infrastructure consuming substantial amounts of electricity and potentially water and land, and what the community will receive in return.
Developers need a convincing answer to that question.
That does not mean presenting every data centre as a major source of permanent employment. Indeed, overstating the benefits risks being counterproductive. The case needs to be credible and specific to the project. Depending on the circumstances, the more meaningful benefits might lie in apprenticeships and skills, local supply chains, infrastructure investment, heat reuse or direct community investment through a Local Benefit Plan.
And that brings us back to the bargain at the heart of the Covenant.
Government wants the sector to deliver substantially more infrastructure and recognises that power, planning and other constraints can prevent viable projects from coming forward. In return for more active support for strategically important projects, it wants developers to demonstrate more clearly that the benefits of data centre growth extend beyond the data centre boundary.
There is an important connection between the two. If the UK wants greater sovereignty over the data and AI infrastructure on which its economy and critical services increasingly depend, it needs to build more of that infrastructure domestically. To do that successfully, the sector needs to improve public understanding and acceptance of why data centres are needed, while ensuring that the communities hosting them see meaningful benefits from doing so.
For developers, the question is therefore no longer simply:
“Can this site accommodate a data centre?”
Increasingly, there is a second question:
“Why should this particular data centre be supported?”
Projects that can answer both questions convincingly should be best placed to navigate an environment in which deliverability, strategic importance, public acceptance and the UK’s wider ambition for greater data and AI sovereignty are becoming increasingly interconnected.
Subscribe to news and viewsWe will only succeed in building out the compute we need if communities can see the benefits of development and if the barriers to delivery are addressed.
Source: gov.uk
