AI data centres in central Scotland may become more cost-competitive if proposals to reduce electricity costs go ahead, according to plans outlined by the UK Government’s Department for Science, Innovation and Technology (DSIT).

Electricity cost cuts

The proposed measures suggest Scottish data centre operators could see electricity prices cut by up to GBP £24 per MWh. This move intends to offset the current cost disadvantage facing Scottish projects compared to countries such as Norway, where hydropower rates are significantly lower. The initiative specifically targets constraint costs, which are payments made to renewable energy generators to halt production when the grid cannot export surplus energy south to England.

Grid challenges

Central Scotland’s renewable energy potential has faced limitations due to grid bottlenecks. This has led to considerable constraint payments-costing UK consumers GBP £1.2 billion so far this year, with forecasts predicting an increase to GBP £3 billion by 2030. Meanwhile, thermal generators in England are sometimes paid to supply energy when renewables in Scotland are curtailed, adding further to overall system costs.

AI growth aims

The DSIT proposals form part of efforts to attract global investment in artificial intelligence infrastructure by positioning Scotland as a competitive location for data centre expansion. Scotland is seen as having suitable land, clean energy resources, and transmission-scale grid connections amenable to digital projects.

Ravenscraig development

Developer Apatura is among those seeking to benefit from the new policy. The company has announced a plan for a GBP £3.9 billion data centre project at the former Ravenscraig steelworks site, featuring 550MW of data centre capacity and 650MW of battery storage. The project’s planning application is expected to be submitted to North Lanarkshire Council later this year. If approved, Apatura estimates the scheme could deliver more than 4,000 permanent jobs, boost Scotland’s GDP by 0.4 per cent, and create thousands more construction posts during the build phase.

Export limitations

The proposal also highlights the role data centres could play in absorbing surplus renewables on windy days, reducing overall grid balancing costs and avoiding wastage of green energy generated in Scotland. By integrating large-scale data centres with battery storage, the plan aims to reduce the amount of energy for which compensation is paid due to export restrictions to the south.

Industry reaction

“This is great news. Scotland has some great advantages when it comes to AI data centres – plentiful green energy, a skilled workforce, a cool climate and a lot of good land, but one of the main challenges we face – in a very competitive global market – is the cost of electricity. To compete in this fast-moving market, lower costs are key. For example, this summer Open AI announced plans to locate its 230 MW ‘Stargate’ data centre in Norway, which benefits from their country’s cheap hydropower, which is less than half of the equivalent cost in the UK. In Scotland, we can deliver projects at even great scale than this, but we do need a more level playing field. This proposal kills three birds with one stone – it will soak up green energy which cannot otherwise get south, it will reduce constraint costs which hit consumer bills, and it will help Scots schemes compete toe-to-toe with rival projects worldwide. Scotland has a genuine opportunity to become a leader in the global AI race. We wholeheartedly welcome this initiative by DSIT and will continue to work with local authorities and others in Scotland to make sure we can capitalise on this once in a generation opportunity,” said Giles Hanglin, CEO, Apatura.

Cost-neutral claims

The UK Government has stated that the proposed approach would not increase costs for other electricity bill payers.