Ofgem has announced a review to consider its regulatory policy and approach to new electricity interconnectors.
The cap and floor regime is currently the regulated route for electricity interconnector developers in Britain, which was rolled out to new near-term projects in August 2014 to incentivise the delivery of further cross-border infrastructure.
This is achieved by setting a minimum (floor) and maximum (cap) on the returns an interconnector can earn.
Where revenues fall below the floor or rise above the cap, payments are made to or from the interconnector via the National Grid Electricity System Operator (ESO). The system operator then takes these payments into consideration when setting transmission charges.
The regulator has held two application windows to date and granted a cap and floor regime to nine projects, with a combined capacity of 10.9GW.
If all the projects go ahead, alongside existing interconnectors and approved projects under development, interconnection capacity in Britain could increase to 15.9GW.
Following its previous consultation, Ofgem noted a review was necessary before opening any further cap and floor windows for future projects and is inviting stakeholders to comment on the scope and notify the regulator of their interest in the review by 9th September 2020.
Tom Corcut, Deputy Director, Wholesale Markets said: “The primary objective of the interconnector policy review is to establish whether there is a need for further GB interconnection capacity beyond those projects currently with regulatory approval.
“If so, the secondary objective of this review is to consider Ofgem’s approach to the regulation of future GB interconnection.”