NeuConnect responds to Ofgem consultation on interconnectors, outlining opportunity for greater competition and consumer benefits

NeuConnect has responded to Ofgem’s recent consultation on interconnectors, setting out how ‘variations’ to the current ‘cap and floor’ regime would open the door to NeuConnect and other project-financed interconnectors delivering greater competition and consumer benefits in the energy market.

In October, Ofgem launched an industry consultation on “proposed changes to our electricity interconnector cap and floor regime to enable project finance solutions”. The consultation follows previous statements from Ofgem that “enabling alternative sources of finance, such as project finance is, in principle, in the interests of GB consumers as it provides access to a broader pool of capital, as well as promotes competition in the interconnector market”.

As one of a small number of interconnectors to be financed using Project Finance, NeuConnect’s consultation response to Ofgem set out how the project’s proposed ‘variations’ to the current ‘cap and floor’ regime would allow it to deliver significant consumer benefits, and make an important contribution to reduced carbon and greater resilience in the UK energy market. The response also set out how the requested ‘variations’ would open the door to a range of future project-financed schemes, injecting greater competition in the energy market.

NeuConnect is a privately-financed £1.4bn interconnector that will create the first direct link between UK and German electricity networks. The new link with Germany, Europe’s largest electricity market, will offer a greater security of supply for the UK market, allowing surplus renewable energy from Germany’s vast renewables infrastructure to be imported into the UK. The project will also deliver over £3bn in consumer benefits.

NeuConnect CEO Christophe Vanhove said: Ofgem’s Cap and Floor regime has paved the way for continued investment in interconnector projects and this latest consultation is an important opportunity to open the door to a range of future project-financed schemes. We look forward to working with Ofgem over the coming weeks to establish a robust and fair regime, allowing continued competition in the interconnector market that delivers value for consumers and the delivery of a low-carbon economy.”

Last month, NeuConnect was included on the European Commission’s list of priority energy projects (PCI status) with the selected projects highlighted as “another important move towards making our energy system more sustainable, more competitive and more secure”. This builds on a period of strong progress for the project over the last 18 months including NeuConnect securing its UK interconnector licence, launching a major £1bn procurement process and starting the planning and permitting process in the UK and Germany.

NeuConnect is being developed by an international, experienced consortium that includes Meridiam, Allianz Capital Partners on behalf of Allianz Group and Kansai Electric Power, with the project also supported by Greenage Power and Frontier Power as developers. The key partners bring a proven track record in delivering large-scale energy infrastructure.