On 18 February 2025, the Commission for Regulation of Utilities (CRU) published its proposed decision paper on the eagerly awaited Large Energy Users (“LEU”) Connection Policy (CRU/202504) (the “LEU Policy”).
The LEU Policy follows a public consultation held by CRU at the beginning of 2024, and outlines conditions to be satisfied by any new data centres seeking to connect to the Irish electricity grid.
Demand from data centres is forecasted to account for 30% of Ireland’s electricity consumption in 2032 and the LEU Policy seeks to find a balance between facilitating further data centre activity and ensuring that Ireland can meet its climate targets.
Key Elements of the Proposed LEU Policy
Investment in Generation and/or Storage Capacity
New data centres will be required to provide dispatchable onsite or ‘proximate’ generation and / or storage capacity which matches their Maximum Import Capacity (MIC) (taking into account derating requirements). This requirement broadly follows the previous Data Centre Connection Offer Process and Policy (published by EirGrid).
However, the LEU Policy proposes a new requirement, which is that any such generation must participate in the Irish wholesale electricity market – the Single Electricity Market (SEM).
The CRU notes that this will help contribute to security of supply, while also meeting operational needs of the data centre.
The CRU also proposes that the performance or availability of this onsite generation will be linked to the data centre, and if performance falls below a certain threshold (to be identified in the relevant connection agreement), the System Operators (ie, EirGrid and ESB Networks) will have discretion to reduce the MIC of the data centre accordingly.
Earlier consultations had suggested that developers would be required to bring onsite renewable generation. The LEU Policy states that “[i]t is envisaged that any technologies used for onsite or proximate generation should be sufficiently futureproofed in terms of facilitating low/zero emissions going forward”. However, there is no explicit requirement for such onsite or proximate generation to be from renewable sources.
Reporting Obligations
All new data centres will be required to report to the System Operators annually in relation to their carbon emissions and use of renewable energy (including direct use and through corporate PPAs). The System Operators will publish a summary of information received from data centres annually.
Readers will be aware of the existing reporting obligations under the EU Renewable Energy Directive (RED), which apply to data centres with an installed IT power of at least 500 kW. Reporting obligations under RED include disclosure of location, floorspace, power demand and performance against key
sustainability performance indicators.
While the precise detail of the reporting obligations under the proposed LEU Policy has yet to be determined, it will be interesting to see how these reporting obligations contrast and compare with the reporting obligations under RED.
Plan-Led Approach
The LEU Policy notes that, in the
longer term, a government-led approach to spatial planning and development may be
required to accommodate LEUs, with coordinated provision of supporting
utilities and infrastructure. This proposal for a plan-led policy is consistent
with Irish energy policy in other areas – in particular, the Irish government’s
policy on the development of the offshore wind sector.
The LEU Policy sets out conditions which will apply prior to implementation of this government-led approach. However, there is no specific timing outlined for introduction of this enduring regime and we expect that data centre developers may request more clarity on the timing of any such change.
Shift to Real-Time Net Zero Usage
The CRU has proposed that, as part of the longer term government-led approach, data centres will eventually be required to transition to real-time net-zero energy use. In practice, this means ‘hourly matching’ – ie, data centres must prove their use of renewable energy on an hour-by-hour basis, rather than as an average over the year.
Location
The location of new data centres will continue to be a relevant factor for the System Operators when determining whether to issue a connection offer (in the context of grid constraints).
However, in a welcome move, the LEU Policy proposes that the System Operators will publish detailed information regarding locational constraints and available network capacity to provide insights to data centre developers.
Gas-Powered Projects
The CRU notes that ‘islanded data centres’ (ie, connected to the gas network but not the electricity grid) are not considered to be in line with the Government policy. However, the CRU is not proposing to introduce any new decisions relating to connections to the gas networks as part of the LEU Policy process, citing that it does not have sufficient legal basis to do so.
It will instead be Gas Networks Ireland’s (GNI) responsibility to monitor security of supply and capacity availability on the gas network and to develop the requisite infrastructure to ensure gas security.
However, CRU notes that it is actively engaging with GNI on a separate workstream to develop an ‘interruptible gas capacity product’ for LEUs.
Demand Flexibility
Given the requirement for data centres to bring onsite generation or storage capacity equal to their MIC, the CRU is not proposing to introduce a requirement for demand flexibility in all new data centre connections. However, the System Operators will have the ability to require demand flexibility on a case-by-case basis.
The CRU notes that any such requirement could be driven by locational constraints or the requirement to integrate renewable energy on the system. However, the System Operators appear to have a degree of discretion in this regard.
What now?
- The LEU Policy will be the subject of a public consultation process that will run for six weeks, ending on Friday, 4 April 2025.
- It is expected that the restrictions on data centres in the greater Dublin area will still be enforced by EirGrid until grid upgrades are completed towards the end of the decade.
- Given that the obligation to shift to real-time net zero usage is likely to force data centres to oversize their renewable energy portfolio, while also investing in battery storage and decarbonised fuels like biomethane, it will be interesting to see how larger and more moderate data centre projects respond to these proposals. It will also be interesting to see how the LEU Policy impacts on the corporate PPA market.
- If the LEU Policy takes effect as proposed, we anticipate increased focus on the decision-making of other public bodies (eg, GNI, the EPA and An Bord Pleanála) in relation to data centres and Ireland's climate targets.
Contacts Us
If you have any questions on the LEU Policy please get in touch with Garret Farrelly; Conor Blennerhassett; Owen Collins; Jessica Branigan, Caragh McCool or your usual Matheson contacts: