The energy regulator began consultations on its so-called ‘cap and floor’ regime in May this year to review its plans to provide regulated returns for power interconnector investors.
Once the interconnector is operating, if revenues exceed the cap, the surplus will be paid back to consumers. If revenues fall below the floor, consumers will pay for a top-up to the level of the floor.
The regime is expected to boost National Grid’s plans to develop interconnector projects linking the UK to Norway and Denmark, and increasing connection capacity to France.
National Grid’s director of European business development Peter Boreham described the roll-out as “really positive news” that would “act as a spur to investment”.
“It brings closer the chance that interconnectors could make up 10% of UK’s electricity generation capacity by 2020 with all the benefits that brings in terms of low cost, low carbon electricity,” Boreham added.
The National Grid has partnered with Norway’s Statnett, Denmark’s Energinet.dk and French transmission operator RTE in developing plans for a total of 3.4 GW in additional interconnector capacity.
The final investment decision for the 1.4 GW Norwegian interconnector project is expected to be made by 2015, but the 1 GW Danish and 1 GW French projects remain at an early stage, a spokeswoman for National Grid said.
The UK is increasingly dependent on electricity imports with the latest government data showing that in the first quarter of this year net imports rose by 74 per cent from 2.8 TWh in Q1 last year to 4.9 TWh.
Electricity imports currently account for just over 5 per cent of total use, the data shows.
Ofgem said the first application window has opened today and will remain open until the end of September, but added that it will open a second application window for projects which may not be eligible to apply now or may benefit from delaying their application.