Planning & Consultation
National government policy:
In July 2018, following a consultation the Irish Government published its National Policy Statement on Electricity Interconnection, a step welcomed by Greenlink as a major boost to investment. The new policy from the Department of Communications, Climate Action and Environment (DCCAE) recognises the benefits of interconnection to Irish energy security, competitiveness and sustainability - the three pillars of Irish energy policy - including benefits to consumers of “lower long term cost of electricity.”
In June 2019, the Irish Government published its Climate Action Plan 2019[A1] , which includes a call for greater electricity interconnection for Ireland “critical to absorbing high levels of renewable generation on to the system.” The Government notes that further interconnection to the UK is planned and makes a commitment to “strengthening the policy framework to incentivise it”. We welcomed the announcement here.
Regulatory approval: UK and Ireland
In the UK, Greenlink was awarded an Interconnector Licence by Ofgem on 10th February 2015 and was awarded Initial Project Assessment (“IPA”) Status under Ofgem’s Cap and Floor Regime on 30th September 2015. This regime is an arrangement introduced by the GB regulator to promote the development, financing and construction of interconnection with other European countries where demonstrably beneficial to consumers. By establishing the Cap and Floor structure after a consultation process, Ofgem has encouraged private capital to promote projects and thereby bring innovation, efficiencies and a drive toward cost reduction for the benefit of consumers. In awarding IPA status following extensive due diligence and analysis of the costs and benefits of Greenlink, Ofgem has gone a long way in validating the rationale for the project.
By their nature, interconnectors typically require the involvement and approval of the regulators for each of the electricity markets being connected. The IPA decision of Ofgem in respect of Greenlink is conditional upon the support of the regulator for the Irish Electricity markets, the Commission for Regulation of Utilities (CRU) (formerly the CER).
In Ireland, Greenlink has actively engaged with the CRU since June 2014 to develop a symmetrical cap and floor regulatory regime between the UK and Ireland.
In 2016 the CRU published an paper informing the public and all relevant stakeholders of their decision to conduct a separate and distinct consultation process for the determination of interconnector policy.
In October 2017, the CRU announced that it was directing EirGrid to progress to the next stage any grid connection applications for electricity interconnectors with Project of Common Interest (PCI) status, which includes Greenlink.
In December 2017, Greenlink submitted an interconnector application under Section 2A of the Electricity Regulation Act 1999. In its application Greenlink requested the CRU to: 1. determine if the construction of the Greenlink interconnector is in the public interest for the project to be considered to be part of the transmission system for the purposes of calculating and imposing charges for the use of the transmission system; and 2. approve the proposed charging methodology for Greenlink pursuant to section 35 of the Act which is based on a 25 year Cap and Floor regime.
Greenlink’s submission included a cost benefit analysis (CBA). The CBA assesses all aspects of the economic impact of adding Greenlink to the Irish and GB markets on consumers, producers and other interconnector owners. The study shows a strong overall benefit, for Irish consumers in particular.
In March 2018, investor confidence was further boosted by the CRU’s announcement it was commencing detailed assessment of the project, including consideration of a Cap and Floor regulatory support regime similar to Ofgem’s and in June 2018, the CRU launched its consultation on the ‘significant’ benefits of Greenlink, detailing the expected Irish consumer benefits and setting out a clear path to regulatory approval.
In October 2018, the CRU determined that Greenlink passes the public interest test to be part of the Irish transmission system and will consult on a Cap and Floor regime in the first half of 2019. This was a major positive development for the project and the CRU and Ofgem are now collaborating to bring the project to fruition against positive policy backdrops in both Ireland and the UK.
We expect this to lead to a Final Project Assessment (“FPA”) decision by both regulators in the UK and Ireland during 2020.