The regulator said it is rethinking its decision to scrap plans for the Greenlink interconnector, following further analysis which suggests the trade benefits are more likely to be positive for UK consumers.
Ireland’s single electricity market (SEM) is currently being reformed, and the analysis for Greenlink was based on assumptions about how prices would be set.
The regulator expected the SEM to have high levels of wind penetration which will, at times, be cut in the day-ahead market, with more expensive generation switched on and ‘constrained on’.
However, new information published by the SEM committee suggests that the preferred market design is more likely to use the unconstrained wholesale price in the day-ahead market, where wind is not curtailed and other generation is not constrained on.
This means that the Irish day-ahead market price is likely to be lower than the UK price more often, leading to higher revenues for Greenlink and a greater value of overall imports into the UK, with UK consumers benefitting from lower wholesale prices as a result.
Ofgem said the granting of a cap and floor regime for Greenlink would depend on the Ireland SEM market design being “as indicated here”.
The regulator also said it would require confirmation that the Irish regulatory regime supported the other 50 per cent of the value of the project.
The consultation will close 11 September.