Energy Hunger or Housing Crisis? The Rising Battle between Data Centres and New Homes in London

The housing crisis in London is facing an alarming threat from the rapid growth of ”energy-hungry” data centres, as highlighted by a new report from the London Assembly Planning and Regeneration Committee. Data centres, which are warehouses packed with powerful computers for serving digital services like streaming and artificial intelligence, are consuming massive amounts of electricity from the National Grid. This energy demand has caused significant delays in new housing developments, particularly in west London, at a time when the city urgently needs more homes.

The report reveals that external energy constraints have stalled new housing projects, sometimes forcing them to postpone their connection to the grid until 2037. This predicament forced the Greater London Authority (GLA) to intervene after receiving reports about significant delays in areas like Ealing, Hillingdon, and Hounslow. With the demand for new housing growing, the GLA managed to find temporary solutions with the National Grid and Ofgem, yet many projects still faced setbacks.

Notably, the report indicates that data centres accounted for less than 10% of the UK’s electrical demand last year, but that figure could rise by up to 600% between 2025 and 2050—with one data centre’s usage equivalent to 100,000 households. Currently, the UK has around 447 data centres, with projections suggesting about 100 more will be established in the near future, predominantly in and around London.

Industry leaders, including Andrew Dakers, CEO of West London Business, emphasize the need for faster expansion of energy capabilities, as the proposed increase of 7 GW by 2037 simply does not meet the current demand. Simultaneously, Rhodri Williams, technical director of the Home Builders Federation, underscored the necessity for government investment in energy supply networks to support housing.

To mitigate these issues, the committee also proposed establishing a separate planning category for data centres to enhance energy coordination. The government and Mayor of London, Sir Sadiq Khan, are expected to address these challenges in the upcoming London Plan, ensuring both housing developments and data centre requirements are balanced effectively. Despite the hurdles faced, the Mayor’s office points to a substantial increase in new council homes, marking the highest figures since the 1970s.