Ofgem has given the green light to three new interconnectors to operate under the cap and floor regime, confirming its minded-to decision announced in June.
The regulator said it remains convinced that the subsea links to France, Germany and Norway will benefit consumers in Great Britain.
The cap and floor regime places minimum and maximum limits on the revenues interconnectors can generate. Any interconnector which fails to earn enough will be topped-up to the floor by the system operator National Grid. National Grid will conversely be entitled to any revenues which exceed the cap.
Following the conclusion of a consultation, Ofgem has granted approval in principle for the Grid Link (to France), Neu Connect (to Germany) and North Connect (to Norway) to operate under the regime, subject to some conditions.
According to the decision document, concerns raised by respondents included the wider impact of increased interconnection on the stability of the power grid and the lack of a level of playing field between domestic and foreign generation due to differing network charges and carbon prices.
“We have reviewed the consultation responses and carefully considered the points raised,” wrote Ofgem partner for networks Akshay Kaul.
“On balance, we do not consider the points raised to alter our minded-to positions for the three projects as detailed in our June 2017 consultation. We remain of the view that these three interconnector projects are likely to be in the interests of GB consumers.”
The decision brings the total number of interconnectors to be offered the guaranteed revenues to eight. Five projects were previously approved in principle after seeking the support during the first application window which closed in September 2014.
The Grid Link, Neu Connect and North Connect interconnectors all applied during the second application window which ran between 31 March and 31 October 2016. If built, the three projects will together add 4.2GW to Great Britain’s interconnector capacity, which currently stands at 8.4GW (existing and under construction).
The latest decision by Ofgem marks the completion of its initial project assessment for the interconnectors. The regulator will now undertake a final project assessment during which it will examine detailed costs, confirm the regulatory regime and set the provisional cap and floor levels. The cap and floor levels will then be confirmed following a post-construction review process.
A 2GW interconnector to France is also being built outside of the cap and floor regime. The completion of all of the aforementioned projects would increase Great Britain’s interconnector capacity to 17.9GW.
The three approved projects
Grid Link – a 1.4GW interconnector running between Kingsnorth in Kent on the UK side and Durkirk in France. The project is being developed Elan Energy and Icon Infrastructure.
Neu Connect – a 1.4GW interconnector passing from the Isle of Grain in Britain to an undecided location in Germany. The project is being developed by Frontier Power, Meridiam and Greenage Power and would be the first interconnector between the two countries.
North Connect – a 1.4GW interconnector joining Peterhead in Scotland with Simadalen in Norway. The project is being developed by the North Connect consortium consisting of Lyse Produksjon, E-CO Energi, Vattenfall and Agder Energi. It will enable excess wind power from Britain to be exported to pumped hydro storage plants in the south west of Norway.