CRU Sets Out Revised Grid Connection Pathway for Data Centres

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CRU Sets Out Revised Grid Connection Pathway for Data Centres

February 18, 2025

The Commission for Regulation of Utilities (CRU) has published its proposed decision paper in relation to its Large Energy Users (LEUs) Connection Policy (the Proposed Decision).

Demand for electricity in Ireland is due to rise sharply in the coming years, driven by LEUs, with rapidly growing electricity demand from data centres a key factor. The proposed decision paper is delivered in the context of this projected demand growth and the CRU’s concerns regarding the security of electricity supply in Ireland and Ireland’s binding climate targets. The long-awaited Proposed Decision arrives after a 19-month review process by the CRU and is an important development for a data centre industry in vital need of clarity.

Demand Growth

Since 2015, Ireland’s total electricity demand has grown by 24%. In that same period, the electricity consumption used by data centres has risen from 5% of total demand to 21% in 2023, accounting for 85% of overall growth. Ireland is a European leader in data centres and has the highest share of national electricity used by data centres in the European Union. This consumption rate is even higher in certain areas, with the CRU estimating that 48% of metered electricity consumption in the Dublin/Meath region was attributable to data centre load in 2023. For context, in 2022, data centres represented 5.2% of national electricity demand in the Netherlands and 3% in Germany. A good comparator for Ireland’s role in European data centres is the role played by Virginia in the United States market, where 25.6% of total state electricity consumption in 2023 was attributable to data centres.

Data Centres

Data centres are capable of connecting to the electricity grid and increasing their operations far quicker than most other LEUs. Given the massive quantities of electricity data centres consume, this can rapidly burden the electricity grid both at a local and national level. In light of this, the CRU has tailored the scope of the Proposed Decision to data centres alone, noting that its application to all LEUs could create a barrier to electrification of existing energy users. Contrary to market rumours that the existing LEU Connection Policy (CRU/21/124) would apply to existing connection applications, the conditions of the Proposed Decision will apply to all connection applications.

The Government has acknowledged the importance of facilitating data centres in Ireland, setting out its policy aims of enabling the “twin transitions” of digitalisation and decarbonisation of Ireland’s economy and society in its Statement on the Role of Data Centres in Ireland’s Enterprise Strategy (the Government Statement). While the Proposed Decision seeks to provide clarity on the pathway to connections for data centres in the near term, the CRU also acknowledges that a longer-term approach is required to provide clear investment signals.

Market Sounding

There are currently no national policy targets for data centres in Ireland. The plans submitted by EirGrid and ESB Networks as part of their financing process (PR6) contain no plans to cover substantially increased LEU demand outside of organic economic growth and Government sectoral targets. To support national policy development and inform network planning, the Proposed Decision requires System Operators to conduct a market sounding exercise to clarify the scale of potential demand from prospective data centres over the next 15 years. Where there is excess or unused but contracted capacity, System Operators will make enquiries with existing data centre connections as to whether this capacity may be returned to the system. Once this market intelligence is compiled, the System Operators will be expected to engage with the CRU and the Government to advise on next steps.

Location

The Proposed Decision outlines that System Operators should consider the location of the data centre requesting connection, ascertaining whether it is in a constrained or unconstrained region to inform the connection decision. Constraints on the electricity system arise when the network cannot deliver the electricity from where it is generated to where it is consumed. The CRU states that there are areas of the network where further connections may not be available until necessary grid reinforcements and upgrades are delivered. In order to provide clarity to potential connection applicants on the whereabouts of such areas, the Proposed Decision requires System Operators to make detailed information relating to network capacity on the electricity system easily accessible so that there can be greater visibility to the investment community as to appropriate locations for data centre development.

The Proposed Decision highlights the merit in locating new data centres close to renewable generation and storage, as such positioning may mitigate security of supply and system constraint issues.

Demand Flexibility

The National Energy Demand Strategy (NEDS) decision paper published last July outlines the assumption that at least 20% of new LEU demand may be expected to deliver “flexibility” in demand. Demand flexibility involves a site increasing or decreasing its demand from the grid in response to certain signals or information. This may be facilitated by load-shifting, i.e. an LEU moving workloads to different times, or by using onsite storage or back up generation to supply power onsite and reduce the load on the grid.

While noting that there may be significant opportunities for data centres to participate in demand flexibility measures, the Proposed Decision has not mandated additional demand flexibility provisions on new data centre connections over and beyond the requirement to provide onsite/proximate demand generation.

Onsite or Proximate Generation and Storage

To address concerns around generation adequacy and security of supply, the Proposed Decision outlines that data centres connecting to the electricity network will be required to provide dispatchable onsite or proximate (in recognition of space constraints on certain sites) generation and/or storage capacity which matches their Maximum Import Capacity, being the maximum amount of electricity that can be taken from the network (subject to derating requirements) by the demand user. This onsite or proximate power generation will be required to participate in the wholesale electricity market. The CRU’s current position is that LEUs with such onsite or proximate generation will not be subject to Mandatory Demand Curtailment (MDC) provisions. LEUs who are subject to MDC provisions may be instructed by System Operators to reduce and/or remove their demand in full from the system during a System Emergency State.

Self-Reporting

Section 15 of the Climate Action and Low Carbon Development Act 2015, as amended (the Climate Action Act) requires the CRU and System Operators to act in a manner consistent with the furtherance of Ireland’s national climate objectives, in so far as practicable. In the Proposed Decision, the CRU considers that the current provisions under the Climate Action Act are insufficient to allow the CRU to mandate explicit emission reduction and offsetting measures. Regardless, the CRU maintains the view that the Proposed Decision should take account of renewable energy policy, namely, to promote the use of renewable energy. As such, the Proposed Decision requires data centres to report to the relevant System Operator annually in relation to their use of renewable energy and their sites emissions, with a future target of reaching close to real-time zero emissions.

Gas Connections

The CRU clarifies that the development of ‘islanded’ data centres, i.e. those connected to the gas network but not the electricity network, are contrary to the Government Statement and merely transfer security of supply concerns from the electricity network to the gas network. Noting that hydrogen may provide a solution in the future, the CRU called on Gas Networks Ireland to continue to monitor the risk associated with connection applications to the gas network.