Ofgem consults on cap and floor regime for Norwegian interconnector

Ofgem has started a consultation on proposals to approve a cap and floor regulatory regime for the NSN interconnector project which will deliver 1.4GW from Norway to Britain.

Ofgem will be analysing development costs, design specifications, and tendering arrangements to ensure these deliver good value for money for customers.

It will set provisional cap and floor levels for NSN’s future revenues in March next year after consulting on detailed cost assessments next year.

National Grid said the decision on cap and floor prices was “an important step” to reaching a final investment decision on the project. 

The NSN project is being developed jointly by National Grid Interconnector Holdings and the Norwegian transmission system operator Statnett.

It is expected to be operational by 2020 and will allow Norway and the UK to trade power and give the UK access to Norway’s flexible and competitively priced hydropower generation. At 730km long it will be the longest interconnector in the world.

Ofgem announced last month that the first link between the UK and Belgium would operate under the cap and floor regime.

The benefits of the project are more competition and lower prices in the wholesale market, a more varied and secure supply and increased access to renewable sources of power, Ofgem said.

Ofgem chief executive, Dermot Nolan said: “Our goal is to encourage new investment in interconnectors that will make energy supplies more secure and increase competition in the market, to the ultimate benefit of households and businesses.

“Our consultation sets out our analysis and evidence base and seeks views from all stakeholders. We expect to make a decision on the justification for the investment in March next year.”