New Irish data centres must generate power back into national grid, rules regulator

Ireland’s Commission for Regulation of Utilities has published its final decision (PDF, 134pages/1.7mb) into how large energy users will be connected into the country’s national grid system. It follows a consultation on the proposals when they were first published earlier this year.

The decision paper confirms the originally trailed requirements for new data centres planned for Ireland to have dispatchable generators or batteries, either at the facility or nearby, which matches their import capacity; and effectively ends a moratorium on new data centres being built in Ireland which came into effect in 2021 over energy usage fears.

Energy generated from the data centre sites would be fed back into Ireland’s electricity supply via the wholesale market, with companies also being expected to source 80% of their annual demand via renewable means – with a six-year glide path period for them to transition to meet such requirements.

Richard Murphy, an energy industry expert with Pinsent Masons in Ireland, said the decision by the CRU was a compromise, but would have ramifications for potential investment into the data centre market in the county.

“Any green industrialisation strategy naturally creates some tension between overlapping policy areas,” he explained.

“Whilst ‘big tech’ has very much led the way with renewable procurement of corporate power purchase agreements to support their operations, this decision brings additional complexity for data centre developers seeking to invest in Ireland who will now also need to navigate wholesale energy markets.

“It is however a pathway forward which, although restrictive for system security and reliability needs, is to be welcomed and could also underpin significant investment for new renewables projects in Ireland as data centres - over a six-year glide path from energisation - will have to ensure that at least 80% of demand on an annual basis is from additional renewable electricity located in Ireland.”

The decision will also have an impact on the location of future data centres in Ireland, with the report warning of significant constraints by existing energy requirements around key areas, such as Dublin and Cork.

Irish electricity system operators EirGrid and ESB Networks will have the power to decide and reject proposed sites for data centres that meet energy supply requirements under the CRU’s new rules, along with drawing up rules by the end of March 2026 over how to manage the 80% renewable energy requirements, and what happens to data centres which do not comply with the new rules.

In particular, explained Murphy, the market will be interested in understanding the rights and obligations in relation to termination and/or reduction of import capacity to ensure such requirements are commercially balanced, reasonable and fair.

The need for reform to data centre energy provision comes as the CRU warned that data centres had been a significant contributor to the 30% increase in electricity demand Ireland had experienced over the last decade, with total electricity consumption by data centres in the country rising from 5% in 2015 to around 22% in 2024.

That figure could rise to more than 30% in the next decade, the CRU’s figures claim.

As a result, the decision paper also signposts a longer, government-led approach to managing the problem in future that brings together planning, infrastructure, environmental and energy processes.

Murphy explained the new rules would mean applicants looking to develop, or invest, in Ireland’s data centre landscape in future would need to demonstrate credible energy procurement targets and plans within the glide path period as part of any grid connection application.

“It remains to be seen however how the requirements of the connection policy will be operationalised in practice,” he added.

“A lot of the CRU decision will be set out by the system operators within the contractual arrangements. The SOs have been left with a reasonable level of discretion and are to publish an engagement and connection process for data centre connections based on the decision by 31 March 2026.

“It is interesting that some of the locational signals such as what is ‘proximate’ have been left within the SOs’ remit. This issue is likely to be very connection specific. Too narrow a definition, in what is a single electricity market across Ireland, may stifle innovation.

“We want to see green energy parks come forward in Ireland. These parks may comprise several parcels of land which, although spread out, may be ‘electrically close’ from a system/network perspective through the connection arrangements proposed. These business models need to be supported by this policy.”