AI data center investors face risks from delayed power grid connections
A new study by IQ-EQ and SREF warns that AI infrastructure projects risk overvaluation as grid connection timelines significantly outpace construction schedules.
Investors in AI data centers risk mispricing assets by categorizing them as having 'secured power' when actual grid connectivity remains years away. According to a new study by investor services group IQ-EQ and the Sustainable Real Estate Forum (SREF), while data center facilities can be built within two to three years, securing a grid connection in major European hubs can take seven to ten years.
The report warns that current market valuations often fail to account for the execution risk inherent in these timelines. Grid access is increasingly being rationed, and regulatory changes in regions like the UK and the Netherlands mean that contracted capacity is no longer guaranteed and may be withdrawn if projects do not progress according to strict schedules. This leaves investors exposed to significant gaps between lease obligations for hyperscale tenants and the availability of power.
To mitigate these risks, the study proposes a governance framework for infrastructure funds that includes clearer energy due diligence. Tamas Mark, Global Head of Real Assets at IQ-EQ, stated that energy must act as an 'investment gate.' The proposed framework recommends that funds incorporate energization thresholds into their documents, ensuring net asset values distinguish between active, powered assets and those still awaiting grid capacity.