The U.K.'s Office of Gas and Electricity Markets (Ofgem) announced, yesterday, it is planning to invite bids to build more submarine interconnectors next year.
The new investment round will be the third of the so-called “cap and floor” regime and will be aimed at doubling existing interconnector capacity by 2030, a target Ofgem wants to synchronize with the goal of quadrupling offshore wind capacity by the end of the decade.
“Project developers and consumers will benefit from Ofgem’s ‘cap and floor' regime,” the authority said in a statement. “This sets a maximum ‘cap’ on revenues and a minimum ‘floor,’ to ensure an adequate return for investors while keeping costs down for consumers.”
More details were provided on which locations should be interconnected and on the neighboring countries the interconnectors may be linked to. Ofgem said, however, that multiple-purpose interconnectors for offshore wind farm clusters will be tendered for the first time.
The planned interconnectors are expected to generate revenue in the wholesale market from congestion revenues, which depend on the existence of price differences between markets at either end of the interconnector. These revenues reflect transportation costs equal to the difference between what customers pay, and generators receive, for transported energy.
In the previous two rounds of the scheme, held in 2014 and 2018, Ofgem contracted around 8.5 GW of transmission capacity that is now under development or construction.
Currently, Britain has an electricity interconnector capacity of 7.5 GW that comes from six projects: the 1 GW BritNed cable (to the Netherlands); the 1 GW Nemo Link (to Belgium); the 500 MW Moyle project (to Northern Ireland); the 500 MW East West interconnector (to Ireland); the 2 GW IFA interconnector (to France); and the 1.4 GW North Sea Link (to Norway).
*The article was updated on December 16 to add the 2 GW IFA interconnector to the list of the existing subsea cables.
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