The CRU’s Three Criteria for the Connection of Data Centres to the National Grid

The Commission for the Regulation of Utilities (CRU) recently published its much-anticipated decision regarding the future regulation of the electrical connection of data centres in Ireland. The Decision, entitled “Direction to the System Operators related to Data Centre grid connection processing" (CRU/21/124), is the culmination of a CRU meeting that began with a paper published in June 2021 (Consultation), which we reported on here.

By way of brief recap, the Consultation had identified the power consumption requirements of data centres as a growing threat to the security of Ireland’s electricity grid. The CRU put three proposals out to consultation, namely:

• Doing nothing, i.e., leaving EirGrid’s bespoke Data Centre Connection Offer Process & Policy protocol as the sole determinant of data centre connection. The CRU flagged in the Decision its view that demand would swiftly outstrip supply if this option was taken.
• Imposing a moratorium on the electrical connection of new data centres for several years, or
• An intermediate approach requiring the electricity system operators, ESB Networks and EirGrid (SOs), to prioritise the processing of data centre connection applications based on:
  • location relative to existing levels of grid “constraint”
  • the level of dispatchable electricity generation or storage that the data centre intends to install, and
  • the data centre’s ability to reduce its electricity demand, including by using its own generators or storage assets.

A version of the intermediate approach was selected. The Decision acknowledged the value of allowing the data centre market to continue to develop and grow in Ireland, while also recognising the role that they need to play in the stabilisation of Ireland’s electrical grid.

The Decision requires the SOs to apply the following assessment criteria on a case-by-case basis, in determining whether a connection offer should be made to an applicant data centre:

• The location of the data centre applicant with respect to whether it is within a “constrained” or “unconstrained” region of the electricity system, and
• The ability of the data centre applicant to provide flexibility in their demand by reducing consumption when requested to do so by the relevant SO in times of system constraint. This includes both with, and without, the use of dispatchable on-site generation and/or storage, which meets appropriate availability and other technical requirements as may be specified by the relevant SO.

Importantly, the criteria apply to all connection applications received for the connection of data centres at any location in Ireland. This includes those applications currently being processed but excluding those already physically connected or for which a connection agreement has already been fully signed.

The “prioritisation” of applications aspect considered under the Consultation has not been preferred. Rather, where a SO is not satisfied that a connection offer can be made that will be consistent with the needs of the electricity system by reference to the above criteria, the SO will not process the application. The criteria themselves have not been afforded any order of priority and the SOs have considerable flexibility in making their determinations. The CRU is satisfied this is appropriate, given each SO’s unique understanding of, respectively, the electricity transmission and distribution systems.

The Decision will be reviewed on an ongoing basis and further directions may be issued by the CRU as it sees fit. The first bi-annual report which the SOs will be required to make to the CRU, for the purpose of monitoring the effectiveness of the criteria, is due by 01 March 2022.

Conclusion

Following a period of unusually intense media interest, the Decision represents a welcome regulatory intervention to control an issue that otherwise threatened the orderly development of Ireland’s tech and electricity sectors.

For data centre devepelopers, the decision represents an opportunity to play a pivotal, and positive role in the development and stabilisation of Ireland’s electrical grid infrastructure while also allowing the development of the Irish data centre hosting market to continue.

Following on from the Decision, developers should carefully consider their:

• Preference for the Dublin area
• Appetite for including electricity generation and storage within their projects, and
• The extent to which they can operate flexibly in their demand

Specialist legal advice should be sought when seeking to finance, develop, acquire, or procure services from data centres. For more information, please contact a member of our Data Centres team.

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