Momentum in the Ofgem led Integrated Transmission Planning and Regulation (ITPR) project is beginning to grow with Ofgem releasing a new consultation on regulation of interconnectors connecting non-GB generation to the GB electricity transmission system. This release coincided with an open letter on ITPR aiming to update stakeholders on the project's progress and the next steps in developing the initiative.

Ofgem is attempting, within its consultation, to provide the most effective regulatory solution to the unique problem of interconnectors specifically designated to individual, non-GB generation assets. As the OFTO scheme is unavailable due to the cross jurisdictional nature of these interconnectors, the only viable, existing option is that of the interconnector licence with appropriate modifications. Such interconnector licences have seen recent examples of the scope for exemptions and add-ons to make them viable (such as the project NEMO interconnector) and it is Ofgem's apparent desire to attempt a within regulation solution to this proposed interconnection as opposed to any legislative changes. The potential increases to the timescale for a workable solution that also involves legislative changes could compromise the viability of short and medium termed planned developments requiring investment decisions for those projects to be made without the benefit of a GB revenue stream.

Ofgem notes that the UK Government is currently considering the provisions detailed in the EU Renewable Energy Directive for trading renewable energy capacity between EU Member States as a potential contributor to the UK in achieving its 2020 renewable energy targets. An Ireland-GB interconnector is shown to be a real possibility with the UK and Irish governments having signed a memorandum of understanding in relation to exploring the possibility of renewable trading. They are now working towards an Inter Governmental Agreement on trading renewable generation to be released during 2014.

In this context, this latest consultation from Ofgem seeks views on the licensing framework and regulatory treatment of these interconnection assets. Options relating to direct connection of specific generating assets with the GB grid are compared with options that would connect the two neighbouring transmission systems and those that would tie a range of Irish renewables developments into the GB system through the interconnector.

Ofgem is taking a pro-active view on the potential for non-GB connections and invites direct consultation with developers considering new projects that could benefit from such connections.

Ofgem would like responses from industry relating to the highlighted regulatory factors and comments on the best method for protecting the GB consumer from potential stranded assets, exposure to unnecessary costs and the risk of unnecessarily underwriting foreign investment or bilateral agreements between commercial entities. Suggestions from fixed, regulated revenue schemes for generation assets to a Cap and Floor scheme as piloted in the project NEMO interconnector with Belgium have been suggested with scope remaining for additional suggestions from the market if available.

Responses to the consultation are requested by 17 January 2014.

Ofgem aims to progress its thoughts on the most appropriate regulatory route, including suggestions on cost allocation measures by spring 2014.

To view the consultation documents please click here

To view the open letter from Ofgem please click here