OpenAI Halts UK Data Centre Project Pending Energy and Regulatory Conditions

OpenAI paused its Stargate UK data centre in the northeast earlier this month, stating it would only proceed when conditions such as regulation and the cost of energy enable long-term infrastructure investment. The decision reflects broader challenges in the UK's energy landscape, where high costs have contributed to industrial declines, according to Professor Sir Dieter Helm, a Professor of Economic Policy at Oxford University who has advised previous governments on energy.

Helm stated on his podcast Helm Talks that Grangemouth refinery has closed, one of the refineries in Hull has closed, the fertiliser industry has gone, the car industry's output is back to its 1950s levels, and the fibreglass industry has gone.

Helm described energy support programs like the British Industrial Competitiveness Scheme, which grants eligible companies up to 25 per cent off their energy bills, as a 'sticking plaster' and temporary measures to buy off pressures. He added that proposed support schemes for household bills are due to the war in Iran, likening such interventions to 'a flea on an elephant' because they fail to address fundamental issues.

The UK government has a target to decarbonise the grid by 2030, which Helm said is increasing bills and digging in heels over Net Zero targets.

He argued that interventions like the British Industrial Competitiveness Scheme would need repetition unless fundamentals are addressed, noting the uncompetitiveness of British industry. Helm pointed to another data centre project, the £2billion Wapseys Wood data centre in Buckinghamshire, where planning documents show it would include a new gas-fired power station to provide a resilient and reliable power supply for the site.

He stated, 'You can't be an AI superpower and a renewable-based economy anytime soon,' emphasizing that one relies on gas and firm power while the other involves intermittent and quite expensive power.

Fossil fuel makes up 85 per cent of the global energy mix and 75 per cent of the UK’s energy mix, Helm said. He argued that the UK's efforts to decarbonise could be wasted if emissions shift elsewhere, with global carbon concentrations still increasing despite domestic reductions.

Helm suggested the UK is presenting itself as a 'clean energy superpower' but warned that leaders worldwide view British climate policies as an example of how not to proceed, because no country wants the highest industrial energy prices in the developed world or to destroy its competitiveness.

' He further noted that the UK's only true home-grown energy source is North Sea oil and gas, as elements in solar panels and wind turbines are manufactured abroad, leading to preferences for Norwegian North Sea gas over British sources and liquefied natural gas from fracked gas with added environmental costs.

Helm said continuing current policy would result in a rapid decline of large-scale industry in Britain. A spokesman for the Department for Energy Security and Net Zero stated that oil and gas is sold on international markets, which set the price for British billpayers, making the UK a price taker.

The spokesman added that clean power is the route to energy sovereignty, lower bills and thousands of good jobs in communities. Helm argued the government must improve British industry's competitiveness and align bills with other parts of the world, noting that everybody else seems to manage it, but the UK does not.