The deal signals the start of the construction phase for the interconnector, which has an estimated cost of €2 billion and is expected to be completed by 2021.
Ofgem granted the NSN project funding through its cap and floor regulatory regime earlier this month, marking an “important step” towards reaching a final investment decision on the project.
Energy secretary Ed Davey said the project will allow the UK to benefit from Norwegian hydropower, “providing green backup power when the wind’s not blowing, and this will actually save people money”.
National Grid’s director of European business development Alan Foster said access to low-carbon energy from Norway hydropower stations will “help us meet the challenge of greener, affordable energy”.
He said: “It also adds to the diversity of energy sources for UK and potentially can reduce peak prices with benefits for consumers and businesses”.
The news follows the recent confirmation of a deal on the Nemo interconnector with Belgium, bringing forward the UK’s first power link to Belgium, and the first interconnector project to be built under Ofgem’s cap and floor funding regime.
Britain’s electricity market currently has 4GW of interconnector capacity: 2GW to France (IFA); 1GW to the Netherlands (BritNed); 500MW to Northern Ireland (Moyle); 500MW to the Republic of Ireland (East West).
Last month, senior government official David Capper told a London conference that the government has a “clear policy” of “at least 5GW of extra interconnection”, meaning greater interconnection is a certainty for the UK regardless of the election outcome.