Energy company Drax has signed a deal with Brookfield and Brookfield's AI platform Radiant to build an AI data centre at the Drax Power Station estate in North Yorkshire, CNBC reports. Drax announced the plan on Tuesday.

The project would start with up to 100 megawatts of capacity from the first quarter of 2028, Drax said in its announcement. A second phase would add 500 megawatts between 2028 and 2031. The partners hope to reach more than 1 gigawatt over time, CNBC reports.

Brookfield estimates that total investment, including chips, could exceed £20bn, with £2.5bn in the first phase, the companies said. The first phase still depends on planning and regulatory approvals and on finding a tenant, according to Drax. A community consultation will begin shortly.

The power station mainly burns wood pellets, City AM reports. Drax said it plans to use spare power capacity at the plant to run the data centre. The estate covers 1,000 acres and has 4 gigawatts of grid access, Drax said.

Chief executive Will Gardiner said the scheme would "help secure the long-term future of the site and protect hundreds of jobs," City AM reports. Drax shares rose sharply on Tuesday morning after the news, CNBC and City AM report.

The plan comes after Chancellor John Healey said in last week's Budget that some data centres could build their own power on site while they wait for a grid link, City AM reports. Last month, Microsoft pulled out of a tie-up with UK firm Nscale after its Essex project could not get a grid connection until at least 2030.

City AM notes the plan could draw criticism from green groups over the carbon released by burning wood to power AI.