Microsoft pulls out of Nscale's 50-megawatt project over power delays
Key Facts
Microsoft has withdrawn from an agreement for an artificial intelligence data centre project operated by Nscale in Loughton, Essex, England, because of delays in connecting the site to the power supply it needs, according to Reuters and CoinDesk. CoinDesk reported that sufficient power for the project may not be available until the early to mid-2030s, putting electricity availability at the heart of the deal's difficulties. The withdrawal is limited to this site within the relationship between the companies, according to a clarification a Microsoft spokesperson gave Reuters. "This decision relates to one site," the spokesperson said, confirming that the partnership with Nscale would continue. Nscale, for its part, told Reuters that the grid issue "does not affect our other contracts," defining the scope of the setback at the British project.
Nscale's original announcement specified 50 megawatts of AI infrastructure capacity at the Loughton site, expandable to 90 megawatts. The plan included delivery of 23,040 Nvidia GB300 graphics processing units in the first quarter of 2027, according to the company's statement on the project. The centre was intended to support the delivery of Microsoft Azure services across the United Kingdom, linking the planned computing capacity to the company's cloud services in the British market. The site's announced design thus combined a specified initial power capacity, scope for expansion and a delivery schedule for the processors that would serve AI operations. The original delivery date in 2027 leaves a gap between the project's schedule and the potential availability of power reported by CoinDesk.
The Loughton project is part of a broader business relationship Nscale previously announced with Microsoft to provide AI infrastructure in Europe and the United States. Nscale said when announcing the broader agreement that the contract covered about 200,000 Nvidia GB300 graphics processing units across those markets. On financing, the company announced it had raised $2 billion in a Series C round to fund its AI infrastructure business. The round valued Nscale at $14.6 billion, according to the company's statement announcing the financing and accompanying valuation. Nscale had also filed for an initial public offering in the United States before news of Microsoft's withdrawal, according to Reuters, with the British site's setback coming after that step.
The Loughton setback coincided with a sharp expansion in contracted demand offers for connections to Britain's electricity grid, according to British energy regulator Ofgem. The regulator said these offers rose from 41 gigawatts in November 2024 to 125 gigawatts in June 2025, as part of its measures to address data centre applications. Ofgem proposed commitment fees for connecting these centres to the power supply, ranging from £237,500 to £712,500 per megawatt. The proposal links the financial commitment to the amount of capacity a project seeks to connect, as part of the regulator's efforts to free up grid capacity by tackling speculative projects. These measures aim to address unviable applications competing with data centre projects for connection capacity, according to the regulator's statement on the proposed reforms.
Ofgem's proposed reforms also include requirements concerning how far a data centre project has progressed and its developers' ability to deliver it, alongside the financial commitment required for a connection. These requirements include evidence of a credible end user for the centre, according to the consultation document the regulator published on reforming data centre electricity connections. The proposals also require proof of the financial ability to develop the centre, linking a project's eligibility to its ability to fund construction rather than its request for power capacity alone. They additionally require proof of the technical ability to develop the project, placing technical delivery requirements among the proposed criteria for projects to advance through the connection process. The regulator has closed the consultation on these reforms, while a decision remains pending, according to the consultation's published status on Ofgem's website.
As for Loughton's future, Nscale reaffirmed its commitment to the project and its business in the United Kingdom despite Microsoft's withdrawal from the agreement for the site. "We remain committed to the Loughton project and to the United Kingdom," the company told Agence France-Presse, reaffirming its position on continuing the British project. It added that it was exploring alternative sources of power for the site, making other supply options part of the steps it is considering to address the power problem. The search for those sources comes as reforms to data centre connections to Britain's grid still await a regulatory decision following the consultation's closure. The originally announced delivery date for Loughton's processors was the first quarter of 2027, against the possibility that the wait for sufficient power could extend into the early or mid-2030s.