The UK currently hosts 523 data centres, the third highest number in the world.
The institute modelled different options for powering a 120 megawatt (MW) data centre and found that renewables, combined with limited gas backup, consistently outperformed nuclear in cost and speed.
The UK currently hosts 523 data centres, the third highest number in the world, with at least nine more in development.
With data centre demand demand set to rise significantly, particularly from artificial intelligence (AI) applications, questions are mounting over how to supply the constant power these centres require.
Growth Zone bottlenecks
The study highlights that government plans to establish “AI Growth Zones” are unlikely to meet this challenge on their own.
At the same time, expanding the national grid to support data centre growth poses significant difficulties: the UK would need to build five times more transmission infrastructure in the next five years than has been constructed in the past three decades. This process would be both lengthy and costly, with much of the burden passed onto consumer electricity bills.
These constraints are leading operators and policymakers to explore alternatives to grid supply, including nuclear SMRs, quick gas connections, or private renewable microgrids that directly link power generation to data centres.
While gas-fired plants offer speed, they risk undermining decarbonisation goals. SMRs, meanwhile, remain an unproven technology in the UK. CNZ’s research sought to test whether renewable microgrids could deliver the reliability, cost savings and scalability needed to support the sector.
The study used the open-source energy system tool to compare three scenarios: a nuclear SMR; a microgrid combining offshore wind, solar generation, battery energy storage (BESS) and gas backup; and a land-constrained version of the same mix without solar. The modelling optimised generators to ensure data centre demand could be met year-round while minimising costs.
Findings on cost
The modelling revealed that renewable microgrids can ensure consistent power while offering significant cost advantages. A microgrid with offshore wind, solar, storage and gas would be 43.4% cheaper annually than procuring power from an SMR.
Even when solar was excluded from the model, the saving remained substantial at 42.1%. A 95% renewable microgrid with gas backup, aligned with the Clean Power 2030 target, was found to be 31.7% cheaper than the SMR case at today’s prices.
The report notes that the cost advantage of renewables is likely to increase further as battery and renewable technology prices continue to fall, while British nuclear costs have historically risen over time.
Meeting demand
Renewable microgrids could meet around 80% of a large data centre’s constant annual electricity need, the researchers found. Offshore wind would provide the bulk of the load, supported by batteries and gas. In the model, gas accounted for around one-fifth of supply across the year, rising slightly in the solar-free scenario.
While some form of non-renewable backup is expected to remain necessary, reliance on gas is likely to decline as battery costs fall and renewable build-out expands.
By comparison, data centres powered directly from the national grid currently draw about 40% of their supply from fossil fuels.
Speed and reliability
Rapid deployment is another advantage for renewable microgrids. The report estimates that in a permissive regulatory environment they could be built within five years, roughly half the time required for an SMR.
The modelling also accounts for “dunkelflaute”, periods of low wind and solar output, during which batteries and gas could sustain data centre operations for multiple days. While the research demonstrates that a private microgrid could meet demand without grid support, it suggests that data centres may still wish to maintain a low-utilisation grid connection for emergencies to minimise operational risks.
Published 26th September 2025
