Ofgem inviting bids for investment in new interconnectors

UK energy market regulator Ofgem is inviting bids to bring forward investment in new electricity interconnectors under its ‘cap and floor’ revenue regime.

Ofgem will hold a third investment round next year to build new subsea interconnectors, which can import cheaper clean energy when needed and export surplus power to neighboring countries.

The UK regulator will also run a pilot cap and floor scheme for the first-time inviting bids for Multiple-purpose Interconnectors (MPIs) which can link up clusters of offshore wind farms directly to an interconnector.

This means when the wind is blowing in the North Sea, these offshore wind farms can export surplus electricity to both Great Britain and Europe.

Currently, the UK has seven operational electricity interconnectors with 7.4 GW of capacity, connecting it to Ireland, France, Belgium, the Netherlands, and Norway, providing almost 7% of the UK’s electricity last year.

The Government wants to more than double existing interconnector capacity by 2030 to support its target of quadrupling offshore wind capacity by the same date.

To help meet that target, next year’s investment round will favor projects able to complete by 2030.

“Greater interconnection of energy across borders is vital to ensure resilience, affordability and sustainability in the future as we transform our energy system,” said Akshay Kaul, director of Networks at Ofgem.

“Our next investment round for interconnectors will bring forward the investment we need, creating green jobs and unleashing the full potential of the UK’s world-leading offshore wind industry, while also protecting customers by capping costs.”

Ofgem’s decision on the Interconnector Policy review concludes a consultation process begun in August 2020.

The decision recognises the benefits of interconnectors to the UK and that an updated version of the existing cap and floor regime is the right tool to deliver it. The changes Ofgem has made are to ensure cap and floor still works well for both investors and energy consumers. The revised regime will be finetuned ahead of being rolled out for the next investment round from mid-2022.

The two previous ‘cap and floor’ rounds in 2014 and 2016 attracted investment for nine projects and currently 8.5 GW of interconnector projects are in various stages of development.