Following a consultation, the regulator said: “We have decided to grant these interconnectors a cap and floor regime in principle, subject to no material escalation in the costs as submitted to us to date by the project developers.”
The FAB Link and IFA2 to France and Viking Link to Denmark will have a combined capacity of 3.4GW, representing a “substantial increase” in UK interconnector capacity, which is currently just under 4GW, Ofgem said.
It added that it is still consulting on abandoning plans to offer financial support to the Greenlink power cable to Ireland, saying it does not offer value for money. It expects to publish further information on this project “shortly”.
Overall, the projects in the pipeline could increase the UK’s interconnector capacity to almost 11GW. Ofgem insisted that further interconnection is expected to benefit consumers by allowing access to cheaper generation, providing more efficient ways to deliver security of supply and supporting the decarbonisation of energy supplies.
In March, Ofgem granted the NSN project funding, giving the go-ahead to an interconnector between the UK and Norway and, last December, UK-Belgium interconnector Project Nemo gained consent, the first to be built under the regulator’s cap and floor regime.
Analysts have predicted that new interconnectors would result in a drop in UK power prices towards European levels in periods of low demand, which would have a “significant impact” on average prices.
Read Utility Week’s analysis of UK interconnection here.