‘Cap and floor’ pilot for multi-purpose interconnectors

Ofgem has invited bids for the third investment round under its “cap and floor” support mechanism for interconnectors.

The regulator has also announced a pilot scheme for multi-purpose interconnectors connected directly to offshore wind farms.

The cap and floor regime allows electricity interconnectors, subject to approval from Ofgem, to receive payments from consumers to top up their income to an agreed minimum if it falls below the floor for a period of 25 years. However, they must also return any revenues that exceed the accompany cap.

Nine projects were approved in the two previous investment rounds in 2014 and 2016. A third round will be held next year and will favour projects that can be completed by 2030, by when the government is aiming to quadruple interconnector capacity.

Ofgem said Britain currently has seven operational electricity interconnectors with a total capacity of 7.4GW, whilst another 8.5GW are at various stages of development.

The regulator will also hold a pilot for multi-purpose interconnectors that are directly connected to clusters of offshore wind farms, allowing them to export surplus power to both Britain and Europe.

A recent study by Imperial College London and the think tank E3G found that an integrated North Sea power grid could save the surrounding countries up to £70 billion by 2050, with multi-purpose interconnectors accounting for £25 billion of the potential savings.

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

“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.”