Ofgem sets maximum revenues for 1.4GW UK-Denmark interconnector

The regulator believes the Viking Link will likely see £5.2bn in consumer benefits over 25 years

Underwater cable being laid

Ofgem has published its Final Project Assessment for the 1.4GW Viking Link project which will connect Lincolnshire in the UK to Denmark.

Under its cap and floor scheme, the regulator sets the cap on the maximum revenue a developer can earn and a floor for the minimum.

The provisional cap level stands at £111.5 million per year and floor level at £61.7 million per year – lower than Ofgem’s initial assessment which were a cap of around £115.2 million and floor of £66.5 million.

If developers don’t make enough from charges to use the interconnector, their revenue will be ‘topped up’ to the floor level, which comes from small increases to the high voltage grid charges consumers pay as part of their energy bills.

Excess revenue above the cap will be paid out to customers through small reductions in these charges.

The Viking Link will be the world’s longest subsea interconnector – a 765-kilometre high-voltage cable – that will enable the transfer of clean energy to power the equivalent of 1.4 million UK homes.

Ofgem believes the project will likely see £5.2 billion in consumer benefits over 25 years.

Networks Director Akshay Kaul said: “Interconnectors boost competition and increase security of supply by allowing us to import from a wider, deeper and cheaper pool of electricity available in neighbouring countries.

“Ofgem regulates interconnector revenues, making them attractive to investors while encouraging competition from a diverse range of market participants.”

National Grid secured a $743 million (£590m) loan for the project – expected to be delivered by 2023 – earlier this year.

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