Under British regulator Ofgem’s new ‘cap and floor’ regulatory framework to secure greater interconnection to boost energy supply, three new electricity interconnectors are proposed with continental Europe. These could be built by 2020 and provide around 3.4GW of electricity capacity.
Two of the interconnectors (FAB Link and IFA2) would connect Britain’s electricity system with France and one (Viking Link) with Denmark. Together the three interconnectors are estimated to provide around £8 billion of benefits to British consumers over 25 years. With them and others under development, Britain also would be set to meet the European Union’s proposed new interconnection target of at least 10% of installed electricity production capacity by 2020. [Engerati-European Energy Union Proposed To Transform Energy System]
‘Cap and floor’ framework
The ‘cap and floor’ approach was developed to encourage the building of new interconnectors. Through this approach, if developers’ revenues exceed the cap, then revenue above the cap is returned to consumers. Conversely, if their revenues fall below the floor then consumers top up developers’ revenues to the level of the floor. The floor encourages interconnectors to be built as developers are protected from the full financial risks of the project, while consumers are protected by the revenue cap from underwriting excessive profits.
The interconnectors which have been assessed under the first application window for the cap and floor regime, and which Ofgem is now consulting on, are:
• FAB Link, of 1.4GW capacity, which would be developed by Transmission Investment and the French transmission system operator (TSO) RTE and run between Menuel in France and Exeter in Devon, England, via the island of Alderney.
• IFA2, of 1GW capacity, which would be developed by National Grid Interconnector Holdings (NGIH) and RTE and run between Tourbe in France and Chilling in Hampshire, England.
• Viking Link, of 1GW capacity, which would be developed by NGIH and the Danish TSO Energinet.dk and run between Revsing in Denmark and Bicker Fen in Lincolnshire, England.
“These three interconnectors would further boost Britain’s energy security and reduce pressure on bills,” commented Martin Crouch, Ofgem’s senior partner for electricity transmission. “To date, under our cap and floor regime, we are looking at adding around 5GW to Britain’s energy supply.”
A fourth proposed interconnector, Greenlink, of 0.5GW capacity between Great Island in Ireland and Pembroke in Wales, was proposed by Element Power. However, it is proposed this not be progressed as the proposals did not demonstrate enough value for consumers, according to Ofgem.
Project NEMO to interconnect Belgium and Britain
There are currently four interconnectors between Britain and Europe, providing around 4GW of electricity capacity. These are a 2GW interconnector to France, 1GW to the Netherlands and 500MW to both of Northern Ireland and the Republic of Ireland. Together they represent around 5% of the existing electricity generation capacity
In December 2014 Ofgem gave the go ahead to the first interconnector to be built under the cap and floor regime. The 1GW NEMO interconnector will run between Zeebrugge in Belgium and Richborough in Kent, with completion due in 2019.
For the project the annual revenue floor has been set at £50.4 million over the 25-year duration of the regime, and the annual revenue cap at £80 million. However, these levels are expected to be adjusted following a final assessment of costs post-construction.
NSN to interconnect Norway and Britain
A second interconnector under way under the cap and floor regime, the 1.4GW NSN interconnector between Kvilldal in Norway and Blyth in Northumberland, is currently undergoing full project assessment. With a length of just over 700km, the project is set to be the longest subsea interconnector in the world when it comes into operation in 2020.
Ofgem’s modelling indicated that NSN, which would be jointly funded by the two countries, would deliver benefits to British consumers of around £3.5 billion over the 25-year cap and floor regime, driven by maximising the value of British and Norwegian renewables.
The full cost submission is expected in mid-2015, which will be followed with a consultation and setting of a provisional cap and floor.
ElecLink to interconnect France and Britain
The third interconnector currently under development, but as a non-cap and floor project, is the 1GW ElecLink, which will run through the Channel Tunnel connecting the Les Mandarins substation near Coquelles in France with Sellindge in Kent. Commissioning is planned in late-2016.