At a glance
- What: a Treasury policy paper, published with the Budget on 28 October 2026. It is policy, not law.[1]
- Where: the whole of the UK, including Wales. It is not limited to England, as the draft planning policy for data centres is.[1][2]
- The deal: data centres the Government considers “strategic” get help to reach the electricity grid faster, in return for meeting five tests on bills, local benefit, the environment, jobs and security.[1]
- Who decides: a new Ministerial Control Centre, chaired by the Minister for AI. What counts as “strategic” has not yet been defined.[1]
- Consultation: none on the Covenant itself. You can comment on the related draft planning policy until 8 January 2027.
Three documents, published on the same day
| Document | Applies to | What it does |
|---|---|---|
| The Data Centre Covenant (HM Treasury) | The UK | Sets the tests, and the Government’s offer of faster grid connections and planning for “strategic” sites.[1] |
| Draft National Policy Statement | England only | The planning rulebook for the largest data centres, with a presumption that they will be approved. Open for comment until 8 January 2027.[2] |
| Written statement on water and energy (Minister for Water) | Water: England | Asks operators, voluntarily, to publish their total and peak water use and their Water Usage Effectiveness, and sets out a “water use hierarchy”.[3] |
So the document that speeds up data centres applies in Wales, while the planning rules and the water statement that go with it apply to England. Wales has no equivalent planning policy or water statement of its own.
Why it matters in South Wales
- The grid is decided in London. Grid connections are reserved to the UK Government,[6] so the Covenant’s promise of priority can be applied to sites in Wales.
- South Wales is a growth zone. The South Wales AI Growth Zone runs “along the M4 corridor from Newport to Bridgend” and could exceed 1 GW by the early 2030s.[5] The Covenant commits to “continue to deliver the five AI Growth Zones across England, Scotland and Wales”.[1]
- The Welsh Government is not mentioned. The Ministerial Control Centre is to “speed up the planning process for the most strategic data centres”,[1] but in Wales planning is for Welsh Ministers and councils. The Covenant does not say how the two will fit together.
- Bro Tathan shows what is at stake. See power for Bro Tathan: a 280 MW connection sought by the Welsh Government, and new substations planned beside Aberthaw.
What the Government offers “strategic” data centres
- Reserving future grid capacity for them, and “reallocating capacity released when other projects leave the connections queue”.[1]
- Finding capacity available before 2030 and transferring “pre-2030 data centre connections contracts to strategically important data centres”.[1]
- For “exceptionally strategic” projects only, temporary on-site power stations until a grid connection is ready.[1]
- A Ministerial Control Centre that “will use the power of the state to accelerate time to power”.[1]
The five tests, and how firm they are
| Test | What it asks | How firm? |
|---|---|---|
| Lower electricity bills | Pay a “fair share”, covering “any energy costs they create”. | No method or figure given. |
| Local communities | A Local Benefit Plan with “substantial investment” linked to the site’s size. | No amount or formula. |
| Environment | Protect nature, minimise water use, publish annual energy and water reports, reuse heat “wherever practical”, and an energy-efficiency score (PUE) of 1.3 or better. | Only the energy score is a number. No water standard. |
| Jobs and skills | Local jobs, apprenticeships, UK suppliers. | No targets. |
| Security | Secure computing for public services, and taking part in “government exercises to test arrangements for prioritising essential services”. | Treated as Critical National Infrastructure. |
All data centres are “encouraged” to meet the tests; strategic ones must meet them to get the Government’s help. No penalty is described, and the tests “will be kept under review and updated as necessary”.[1]
Water: what the three documents say together
- The Covenant: minimise demand on public water supplies “by using technologies such as closed loop water systems”, and publish annual water use.[1]
- The draft planning policy (England): disclose estimated annual and peak-day water use; no water standard; drought is not a reason to refuse. More.[2]
- The water statement (England): operators are “strongly encouraged” to publish total and peak water use and their Water Usage Effectiveness; the Government will consider a legal duty to report “if sufficient data is not provided”. It also says that “Water companies do not have to supply data centres with water”.[3]
- The law, in Wales as in England: a water company need not provide a new non-household supply if doing so would put at risk its ability to supply homes now and in future.[4] That is a safeguard when a data centre first asks for water. None of the documents says what happens in a drought once a data centre is connected.
A Treasury document: points to consider
These are our own reading, offered for you to weigh, not findings of any public body.
- It is about growth and investment. The Covenant comes from the Treasury, with the Budget, and its machinery is designed to get data centres built faster. Its protections are mostly unquantified; its fast-track is backed by legal powers.
- Electricity bill-payers are mentioned; water bill-payers are not. The first test says households should not pay for the energy costs data centres create. There is no equivalent test for water. If new reservoirs, mains or treatment works are needed for data centres, the Covenant does not say who pays.
- In Wales that cost would fall on Welsh water customers. Water is devolved, and the water statement covers England only. Unless the Welsh Government or the water company requires developers to pay in full, the cost of supplying data centres in Wales could fall on bill-payers here.
- Is Wales being looked at because it has water? The Covenant says the Government will “identify locations where capacity may be available” and align future grid connections with constraints “including water and land”.[1] Wales has more water than south-east England, which is the reason to ask the question. But the largest concentration of data centres remains around London and Slough,[9] and there are AI Growth Zones in England too, so we have found no evidence that data centres are being deliberately steered to Wales.
- Who decides, and who waits? Priority will be decided by UK Ministers on criteria not yet published. Capacity given to a data centre is capacity not given to the next project in the queue, which might be renewable energy, housing or local industry.
- Essential in an emergency? Data centres are asked to take part in exercises on “prioritising essential services”; under the electricity emergency code some can be protected from rota power cuts;[8] and a report published on GOV.UK says their status as Critical National Infrastructure means they “will likely face fewer restrictions on water access, even in water-stressed areas”.[7]
Questions you could ask
To: Kanishka Narayan MP, Minister for AI, UK Government (chair of the Ministerial Control Centre)
“How will the Ministerial Control Centre define a “strategic” data centre, will its decisions and reasons be published, and what role will the Welsh Government have when a site in Wales is considered? Do the “backstop operational control measures” in the Covenant mean that data centres can be required to reduce their electricity use before households are disconnected in a supply emergency?”
Follow-up: If the answer is incomplete, a request via WhatDoTheyKnow to the Department for Business, Innovation, Science and Trade for the Control Centre’s terms of reference.
To: Adam Price MS, Cabinet Minister for Enterprise, Connectivity and Energy, Welsh Government
“Was the Welsh Government consulted on the Data Centre Covenant, what part will it play when a data centre in Wales is considered for priority, and will it publish its own policy on data centres and water, so that the cost of supplying data centres in Wales does not fall on Welsh water bill-payers?”
Follow-up: If the answer is incomplete, a request via WhatDoTheyKnow to the Welsh Government for any correspondence with the UK Government about the Covenant.
Comments on the draft planning policy can be sent until 8 January 2027: see how to respond. It is fair to mention the Covenant in your response, since the two are linked.
Sources for this page
- HM Treasury, ‘The Data Centre Covenant’ (policy paper, 28 October 2026). https://www.gov.uk/government/publications/data-centre-covenant/the-data-centre-covenant
- UK Government, draft National Policy Statement for Data Centres (October 2026; England only). https://assets.publishing.service.gov.uk/media/6ae1c5937fe45a08a4036e4e/draft-national-policy-statement-for-data-centres.pdf
- Emma Hardy MP, Minister for Water and Flooding, written statement ‘Enabling Sustainable Data Centre Growth’, HCWS426 (28 October 2026). https://questions-statements.parliament.uk/written-statements/detail/2026-10-28/hcws426
- Water Industry Act 1991, section 55 (supplies for non-domestic purposes; extends to England and Wales). https://www.legislation.gov.uk/ukpga/1991/56/section/55
- UK Government press release on AI Growth Zones (20 November 2025): the South Wales zone runs “along the M4 corridor from Newport to Bridgend” and could exceed 1 GW by the early 2030s. https://www.gov.uk/government/news/ai-to-power-national-renewal-as-government-announces-billions-of-additional-investment-and-new-plans-to-boost-uk-businesses-jobs-and-innovation
- Senedd Research, ‘Data centres in Wales: How will Wales manage a rapidly growing industry?’ (July 2026). https://research.senedd.wales/media/eytgh5cx/data-centres-in-wales.pdf
- Government Digital Sustainability Alliance, ‘Report: Water use in AI and Data Centres’ (published on GOV.UK, 2025), section 4. https://assets.publishing.service.gov.uk/media/688cb407dc6688ed50878367/Water_use_in_data_centre_and_AI_report.pdf
- Department for Energy Security and Net Zero, Electricity Supply Emergency Code guidance (revised April 2026). https://assets.publishing.service.gov.uk/media/69d7b134ad08dc1bc975fa3b/esec-guidance-april-2026.pdf
- Department for Energy Security and Net Zero, ‘Data centre electricity consumption in Great Britain, 2020 to 2024’ (June 2026): Slough’s share of data-centre electricity. https://assets.publishing.service.gov.uk/media/6a3e9f25da47783d87723bf2/Data_centre_electricity_consumption_in_Great_Britain__2020_to_2024.pdf