Ofgem confirms ‘cap and floor’ guarantee for 4.2GW of interconnections – but Brexit raises concern

Ofgem has confirmed it will guarantee returns for investors in three new Interconnector projects totalling 4.2GW. The three - GridLink (to France), NeuConnect (to Germany) and NorthConnect (to Norway) – will all be able to operate under a ‘cap and floor’ regime.

However, the regulator noted that at least one project may be delayed by Brexit. Half of interconnectors’ costs and revenues are overseen by national regulators at the continental landing point. France’s regulator says it will not be able to determine the need for further interconnection between GB and France until the UK’s future relationship with the EU is clarified.

The regulator dismissed complaints from other generators over the charging regime for interconnectors, which do not pay transmission charges because they are not classified as generation, or carbon costs. Ofgem said an analysis of interconnector arbitrage opportunities based on policy differences in carbon pricing and balancing charges found that although the projects are less beneficial overall, they continue to offer benefit to GB consumers.

Ofgem also dismissed concerns over whether the new interconnections could cause system problems in the GB network.

GB currently has four interconnectors in operation – IFA (2GW), BritNed (1GW), EWIC (500MW) and Moyle (500MW). It has four under construction: Nemo Link (1GW), ElecLink (1GW), NSL (1.4GW) and IFA2 (1GW).