How to power AI
Think tank: Social Market Foundation
Author(s): Sam Robinson; John Asthana Gibson
February 10, 2025
This report from UK think tank the Social Market Foundation sets out how to ensure the UK’s energy system can meet the power demands of the technological revolution.
Data centres are hugely important for the UK’s AI ambitions. They provide the compute power that AI applications rely on. If the UK wants to succeed in AI, then we need a lot of data centres.
Unfortunately, the UK is currently unfit to meet these power demands – our electricity is too constrained, too expensive and too carbon-intensive. For the UK to realise its AI and technological ambitions, it needs a plan to fix its failing energy policy. We set out what that plan should be.
In the long term, the country needs a future of clean energy abundance. Nuclear power is clearly the most effective way to achieve this, and the government should change its approach to nuclear energy development, building large nuclear power plants in fleets, and should facilitate the development of factory-assembled small modular reactors, to drive our energy costs down. But developing nuclear inevitably takes a long time. And we are at real risk of squandering our strengths in AI to other countries that have a more forgiving energy situation.
We need more immediate reforms to drive costs down. To that end, we recommend moving to a system of locational pricing for wholesale electricity in Great Britain. This would see the electricity grid split into different zones, with the price of electricity set to reflect the conditions of demand and supply in each. This could see electricity prices plummet in regions where there is lots of renewable energy, like Scotland and the North East. But it could reduce energy costs for consumers across the country through a more efficient siting of both generation and demand.
Finally, in the short term, the government should provide tax credits based on the amount of renewable electricity purchased via Power Purchase Agreements, in order to incentivise the development of renewable energy and reduce strain on the electricity grid.
