Ofgem has withdrawn the cap and floor support awarded in principle to the 1.4GW NorthConnect interconnector with Norway.
Following significant delays, the regulator said there is “no realistic prospect” of the project being completed in the coming years as set out when it undertook its initial assessment.
Interconnectors operating under the cap and floor regime receive top-up payments collected from consumers’ bills if their annual revenues fall below an agreed floor but must return any revenues that exceed the corresponding cap. The mechanism applies for a period of 25 years.
NorthConnect applied for cap and floor support during the second application window, which was awarded in principle in January 2018 following an initial project assessment (IPA).
This support was contingent on the timely delivery of the project to ensure consumers realise the anticipated benefits that informed Ofgem’s decision.
However, the regulator said the developer has encountered significant delays related to the approval and regulatory treatment of the interconnector in Norway.
It noted that the current Norwegian government has announced it will not approve new international connections during the current parliamentary term (until at least 2025), meaning the earliest possible connection date would be significantly beyond the latest connection date for window 2 projects of January 2024.
Ofgem also recently delayed a decision on whether to include the NorthConnect project in its pilot scheme for multi-purpose interconnectors until spring 2023.