Trowers Tech News - May 2025

Welcome to the latest edition of Trowers Tech News.

This month, we focus on the increasing demand for AI data centres and AI's impact on the UK's energy industry.  As a starting point, it is well accepted that the continuing rise in demand for artificial intelligence data centres is driving a surge in electricity demand. A recent report from the International Energy Agency predicts that global data centre energy demand will more than double by 2030 to around 945 terawatt-hours (TWh) with the majority of this increase being driven by AI Data Centres. For context, this is higher than the entire current energy demand of Japan. At the same time, AI itself has the potential to create significant efficiencies within the energy industry to assist grid operators in the shift to low-carbon energy systems, helping to both: 

1. manage the complexity of energy systems based upon intermittent and distributed energy generation and

2. create efficiencies and value within the rapidly evolving energy sector. In the context of this background, we set out below some key developments in relation to the UK data centre market.

Top tech trends: deals, regulations and legal shifts

Josh Partridge, Partner in the Energy and Sustainability department

AI Energy Council and AI Growth Zones

The UK's AI Energy Council was unveiled earlier this year as part of the Government response to the AI Opportunities Action Plan. The AI Energy Council is co-chaired by the Technology and Energy secretaries with the aim to consolidate expert insights on the energy demands of AI as part of the UK's economic growth plans. A key aim of the AI Energy Council is to explore how the UK's plans for accelerating AI infrastructure can work alongside the UK's clean energy objectives. 14 organisations from across the tech and energy sectors form part of the AI Energy Council including EDF, Ofgem, National Energy System Operator (NESO), Scottish Power, National Grid, Google, Microsoft, Amazon Web Services, ARM, and Brookfield, with the aim to provide a collaborative approach in bringing the energy and technology sectors together to allow the effective deployment of AI infrastructure in the UK.
 
A key concern for the AI sector globally is the availability of power to meet the high energy demands of AI data centres. One tangible step taken so far in the UK is the plan to establish new AI Growth Zones to stimulate private investment in AI development in areas with ready access to power. The Government earlier this year invited expressions of interest from local and regional authorities and the data centre industry as an initial step to inform the Government of the demand and appetite for such AI Growth Zones. The particular requirements for AI growth Zones include the availability of >500MW of electricity capacity, so the Government is particularly interested in sites that already have large existing power connections, or that can host on-site (and low carbon) electricity generation and energy storage. The Government expects to set out a formal selection process for AI Growth Zones in spring 2025 so we expect to have an update on this process imminently.

Daniel Dong, Trainee Solicitor, Energy and Sustainability

Ofgem and AI in the energy sector

Ofgem as the regulator of the energy industry in the UK has begun to set out its approach to AI in the sector, which focuses on consumer protection and fairness, system security and safety, sustainability, and ethical use of technologies to support the safe and responsible adoption of AI in the energy sector. Ofgem recognises that AI technologies can bring substantial benefits to the energy industry in the UK, particularly in providing efficiencies for consumers, energy suppliers and network operators in managing large transactional volumes and managing the increasing complexity and granularity of energy flows on electricity networks and the shift towards low carbon generation. Low carbon generation is often intermittent by its nature (i.e. solar and wind generation are weather dependent and AI technologies have the potential to assist in providing more accurate forecasting and modelling of weather dependent generation assets), and is also increasingly distributed across energy networks (e.g. offshore wind farms, and solar plant installed on agricultural land, or individual properties). This presents far more complexity than the historic electricity generation profile of the UK (and many other countries), which has predominantly been based on large centralised and controllable power generation assets that provide greater certainty and predictability – and it is hoped that AI technologies can help grid operators manage this increased complexity to allow low carbon electricity systems to be developed and managed more efficiently and effectively. 

However, as the regulator, a key concern for Ofgem is that the use of AI benefits and protects energy consumers. To this end, Ofgem has recently consulted on draft AI guidance setting out good practice for those looking to procure or deploy AI within the energy sector. This guidance aims to set out good practice in the procurement or deployment of AI in the energy sector, and builds on Ofgem's call for input on the use of AI in the energy sector, and high-level strategic approach to AI, both published in April 2024. Ofgem's AI taskforce has developed a risk matrix, recommendations for managing these risks, and has also planned for a new statutory AI duty (details awaited). The regulator recently invited energy sector licensees and market participants to AI regulatory laboratory sessions to test their draft guidance. Ofgem is looking to finalise and publish the consultation responses and AI guidance for energy companies this spring.

Kathryn Noble, Partner, Construction

Cooling data centres as AI demand heats up

As demand for data centres surges to keep pace with the increasing reliance on supercomputing enhancements and AI adoption, meeting sustainability objectives remains prominent on the agenda for businesses and the wider industry.

A hot topic in the market is the emergence of alternative cooling solutions to deal with the heat generated by the expanding scale of data centres, particularly those catering for high-density workloads driven by AI. Keeping data centres and their components cool is critical to optimizing efficiency, performance and longer-term reliability of hardware; not doing so can result in fundamental failures of the key systems and resilience. Balancing energy efficiency and sustainability with the development of high capacity and high-density workload data centres is also contributing to driving innovative cooling alternatives to traditional processes that consume large quantities of water.

Data centres embrace a number of different cooling technologies, dominated by traditional air cooling strategies, which circulate cold air from the natural environment/ air conditioning systems, and expel generated heat. These are being challenged by the more heat intensive, higher-capacity modernised data centres. Whilst liquid cooling as a concept is not new to the market, there are increased discussions around exploring and adopting this method to more effectively and precisely transfer the higher heat generated by the equipment and servers contained in an AI facility. Increasing energy efficiency, driving down operation and maintenance costs, and reducing water consumption (particularly in geographical areas where water scarcity is a concern) play key factors in selection of the appropriate cooling method. Considerations as to how to make use of excess heat (e.g. to convert to a source of power, or to directly sell waste heat to district heating networks) are also playing an interesting part in the conversations around energy efficiency/ sustainability of data centres.

Accommodating increasing energy and AI demands is certainly contributing to the leap in development of new, modern data centres, including future proofing those assets to deal with technology advancements. So too, focus is turning to innovative ways to upgrade existing data centre facilities and retrofit energy efficiency/savings solutions to reduce costs and optimize sustainability and performance outputs. Our teams of dedicated construction and energy lawyers are on hand to discuss your business and energy-related goals in construction, development and upgrades to your assets.