Large Energy Users Connection Policy

The Commission for Regulation of Utilities (CRU), Ireland’s utilities regulator, has published a proposed decision on the “Large Energy Users connection policy”. Announced on 18 February, this decision is part of an ongoing policy making process that has drawn significant industry attention and will apply solely to new data centres. Our Energy team reviews the implications for stakeholders.

Background

The share of electricity consumed by data centres in Ireland has risen from 5% of total national demand in 2015 to 21% in 2023. This sharp increase highlights the rapid growth and significant energy demand of what remains a relatively new class of asset. This rapid transition was perceived to threaten the operational security of the Irish electricity grid, particularly in the Dublin region. As a result demand side-measures were introduced to what had been a relatively lightly regulated area.

The CRU issued a direction[1] in November 2021 to EirGrid and ESB Networks (SOs), the operators of Ireland’s electricity transmission and distribution systems. Under this direction, the SOs were required to implement a set of assessment criteria. These criteria determined how applications for new data centre projects to connect to the grid would be processed.

This direction was essentially a reactive measure intended for short-term application, and has been overtaken by a number of wider Irish Government policy objectives. For this reason, the CRU subsequently ran a consultation exercise[2] in early 2024 with the aim of establishing a longer-term pathway for new Large Energy User (LEU) connections to the electricity and gas systems.

The latest development in the policymaking process is the publication, on 18 February 2025, of the “Large Energy Users connection policy – Proposed Decision Paper”[3] (the Proposed LEU Decision). The Proposed LEU Decision outlines CRU’s intended approach to connecting new data centres to Ireland’s electricity grid.

Key elements of proposed decision

The Proposed LEU Decision applies solely to data centres seeking to connect to the Irish electricity grid. The CRU is seeking feedback as to whether a minimum level of Maximum Import Capacity (MIC) should be set. This would determine if the policy, or certain elements of it, should not apply below that threshold. If a minimum level is needed, respondents are also asked to suggest a reasonable threshold for MIC.

Data centres connecting to the electricity grid will be required to provide dispatchable generation or storage to the network. The required generation or storage must be located on or near the data centre site and participate in the Irish wholesale electricity market.

The Proposed LEU Decision goes on to state that data centres providing onsite or proximate dispatchable generation, as required, will not be required to meet Mandatory Demand Curtailment (MDC) provisions.

MDC is a measure with its regulatory origins in CRU2024001. It allows the SOs to instruct affected users to reduce or cease importing electricity from the grid at short notice. The measure is widely regarded as incompatible with preferred modes of data centre operation. The fact that MDC is mentioned at all in the Proposed LEU Decision suggests that it will be retained for any Irish data centres connected under the previous policy, and which are currently subject to MDC.

Under the Proposed LEU Decision, SOs must continue to consider the location of each requested data centre connection. They are required to determine whether the site is in a constrained or unconstrained region of the electricity network. SOs will be required to regularly publish information as to the location of current and future connection capacity as well as any constraints on the electricity grid.

The Proposed LEU Decision does not include a general requirement that new data centres be capable of exercising “demand flexibility”. However, the SOs will be permitted to impose demand flexibility requirements on data centres “as deemed necessary on a case-by-case basis” and depending on the circumstances of the local system. It is also anticipated that SOs will develop voluntary schemes that reward demand flexibility, and which may be commercially attractive to connected data centres.

A significant element of the Proposed LEU Decision is that new data centres will not be subject to any minimum requirement as to the procurement of renewably-sourced electricity. However, data centres will be required to self-report to the SOs annually on a number of metrics related to their use of renewable energy and the emissions caused and abated by their activities. The SOs will annually publish a summary of this information. While not particularly clear on the point, the Proposed LEU Decision leaves open the possibility that SO reporting will allow the contribution of individual data centres to be identified.

Next steps

As a proposed decision only, the Proposed LEU Decision remains open to public comment until 4 April 2025 and is not yet binding policy.

The CRU has flagged that implementing any final decision may require that it make a new direction to the SOs under the Electricity Regulation Act 1999. This direction would apply to all new connection contracts for new or additional data centre import capacity within the scope of the Proposed LEU Decision. Any new direction is expected to replace CRU/21/124.

It is also noted that implementation of the Proposed LEU Decision will be reflected in the terms of the affected connection agreements. The CRU and SOs will need to do further work to finalise the details and the exact contractual language for its implementation.

In the longer term, the CRU notes that the 2025 Programme for Government signals an Irish Government ambition to facilitate data centre growth alongside a “comprehensive plan to accelerate energy generation, connectivity, and planning processes”. The CRU takes this to mean that the Irish Government will in future have an expanded role in the approval of new data centres, presumably in accordance with a new policy and/or legislation that has yet to be developed. In the meantime, the CRU intends to require the electricity and gas system operators to conduct a “market intelligence” exercise to gather information from the data centre industry on the level of interest in prospective data centre demand connections.

Conclusion

The Proposed LEU Decision should provide welcome clarity for developers and the sector generally. The requirement for dispatchable generation and/or storage had been anticipated, however, dedicated procurement of renewable electricity has not been stipulated, which based on commentary had been expected by some stakeholders.

While MDC appears to be a measure whose days are numbered, uncertainty remains as to the extent of the freedom that will be given to SOs to impose “demand flexibility” requirements – and whether this may amount to MDC by another name.

For now, interested parties are encouraged to seize the remaining opportunity to influence the final form of the Proposed LEU Decision, through the consultation process.

For more information and expert advice, contact a member of our Energy team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

[1] CRU Direction to the System Operators related to Data Centre grid connection processing, CRU/21/124

[2] Review of Large Energy Users connection policy, CRU2024001

[3] (CRU/202504)