Ofgem withdraws cap and floor regime for 1.4 GW interconnector

UK energy market regulator Ofgem has withdrawn the cap and floor regime awarded in principle for a 1.4 GW interconnector due to the project having encountered “significant delays”.

Following the Initial Project Assessment (IPA), Ofgem awarded NorthConnect Limited a cap and floor regime in principle in January 2018 for the proposed namesake 1.4 GW electricity interconnector between Norway and Scotland which is set to enable the exchange of wind energy and hydropower.

The decision, brought under the second application window, was contingent upon the developer meeting IPA conditions intended to incentivize the timely delivery of the project and to ensure that consumers start to realize the anticipated benefits.

However, NorthConnect Limited has encountered “significant delays” in progressing the interconnector, which in particular includes delays with respect to reaching an agreement with the relevant regulatory authorities in Norway on the approval and regulatory treatment for the non-Great Britain portion of the project, Ofgem said in a letter published on 15 December.

The outlined delays have led to NorthConnect Limited not being able to meet a number of the IPA conditions. Based on engagement with the developer, the UK regulator states it had concluded that, given the significance of these delays, there is no realistic prospect of the project being delivered in the coming years in the form assessed at the IPA stage.

Ofgem also notes that the current Norwegian government has announced that it will not approve new international connections during the current parliamentary term, until at least 2025, and the resulting delays would take the earliest possible connection date for NorthConnect significantly beyond the latest connection date of January 2024 for Window 2 projects.

“With the project having encountered significant delays and with no realistic prospect of it being delivered in the coming years in the form assessed at the IPA stage, we consider it necessary to withdraw the cap and floor regime awarded to NorthConnect,” the letter writes.

Ofgem said that the decision, effective from the date of the letter, does not affect any future applications from the developer, adding that it recently received a Multi-Purpose Interconnector (MPI) pilot project application from the NorthConnect consortium through the MPI pilot scheme and will be discussing it in due course.

NorthConnect is a joint venture between the Scandinavian companies Lyse, Agder Energi, Hafslund E-Co and Vattenfall. In passing the Third Energy Package into law, the Norwegian Parliament also determined that Statnett should have a controlling interest in the operation of the Norwegian half of the interconnector and discussions are currently ongoing.

On the UK side of the link, the subsea cable will come to land in Scotland, near Long Haven Bay, and connect to a converter station at Fourfields near Boddam. The cables will cross the North Sea to Norway.

Similar infrastructure is proposed at the Norwegian landfall at Sima at the end of Hardangerfjord, with a converter station in Simadalen.