18 October 2018
Cost Benefit Analysis shows Greenlink passes public interest test to be part of the Irish transmission system
CRU to consult on ‘Cap and Floor’ regulatory regime in first half of 2019
CRU and Ofgem to collaborate to bring project to fruition against positive policy backdrop in Ireland and UK
Greenlink Interconnector Limited has today welcomed the announcement by Ireland’s electricity regulator, the Commission for the Regulation of Utilities (CRU) , that the Greenlink interconnector between Ireland and the UK (‘Greenlink’) is in the public interest and should be supported with a new regulatory regime. The CRU’s determination paves the way for private capital financing of Irish interconnectors to meet new national policy objectives on interconnection.
The decision follows a public consultation by the CRU over the summer on the ‘significant’ positive impacts that will be realised for Irish electricity consumers and the increased security of supply that Greenlink will bring to the island of Ireland. The CRU examined the project’s Cost Benefit Analysis to assess if it would be in the public interest for it to be considered as part of the Irish transmission system. The CRU also conducted its own CBA of Greenlink with support from independent advisors and, like Ofgem in the UK, concluded that the public interest test was met.
Greenlink is a 205km 500MW interconnector project linking the electricity grids of Ireland and Great Britain. It is a €400million privately-financed Project of Common Interest (‘PCI’) , making it one of Europe’s most important infrastructure projects, and is due to commence construction in 2020.
In today’s announcement, the CRU confirmed that in the first half of 2019 it will go on to consult on the proposed ‘Cap and Floor’ regulatory regime to support Greenlink . Cap and Floor limits market exposure for consumers by setting a ceiling on the revenues that Greenlink can receive, whilst reducing the cost of the project by facilitating low cost equity and debt capital. A ‘Cap and Floor’ regime in Ireland would create a symmetrical regulatory regime in both Ireland and GB, further reducing the cost of financing.
Simon Ludlam, Project Director for Greenlink, said;
“This decision sets Greenlink on the home straight to become Ireland’s next interconnector. The Irish Government has already published positive national policy on interconnection, recognising that projects like Greenlink will improve energy security, support decarbonisation and put downward pressure on consumer prices. We therefore welcome the CRU’s decision that Greenlink passes the public interest test and I am delighted that the regulators on both sides of the Irish Sea will now collaborate to help bring the project to fruition in 2023.”
Mike O’Neill, Chairman of Greenlink, added;
“This welcome announcement by the CRU follows a rigorous and independent analysis of Greenlink. It is a clear vindication of our decision to develop the project and our shareholders’ ongoing support, which is rooted in fundamentals of the significant benefits that Greenlink brings as we move to a decarbonised world. This has enabled us to bring the project to an advanced stage of maturity, including the commencement of marine surveys and tendering for construction, which will create inward investment and jobs. Private capital has an important role to play in undertaking critical energy infrastructure investment such as Greenlink, and this regulatory framework facilitates this whilst protecting the consumer.”
In today’s announcement, the CRU states that new interconnectors should be built only to the extent that they benefit the public at large. The CRU notes in the Public Impact Statement (pages 4-5) that “new electricity interconnectors can offer multiple potential benefits” – lower prices, renewable energy integration and security of supply.
In July 2018 the Irish Government published its National Policy Statement on Electricity Interconnection, noting benefits to Ireland, and the CRU states it has been mindful of this policy in making today’s decision.
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Notes to Editors
The Department of Communications, Climate Action and Environment published its National Policy Statement on Electricity Interconnection in July 2018 https://www.dccae.gov.ie/en- ie/energy/publications/Documents/19/National%20Policy%20Statement%20on%20Electricity%20In terconnection.pdf
Greenlink has been recognised as a PCI by the EU following support received from both the Irish and UK governments. A PCI is a project selected by the European Commission that will have a significant impact on energy markets and market integration in EU countries, boost competition on energy markets, help the EU’s energy security by diversifying sources, and contribute to the EU's climate and energy goals by integrating renewables. In November 2017, Greenlink was re-confirmed as a PCI by the European Commission: https://ec.europa.eu/energy/en/topics/infrastructure/projects- common-interest
The Cap and Floor regime operates to limit consumers’ financial exposure to interconnection projects. If the interconnector’s revenues exceed a maximum (the cap) then the excess is returned to consumers. Similarly, in the unlikely event that revenues fall below a minimum (the floor) then consumers top up the developer’s revenues to the level of the floor. This system is already in place under the UK’s energy regulator, Ofgem, and can be used to attract long-term private capital and reduce financial burden on government.
About Greenlink: Greenlink is a proposed 500MW, 205km subsea and underground high voltage direct current (HVDC) interconnector (with associated converter stations) between the existing electricity grids in Ireland and the UK, operated respectively by EirGrid and National Grid Electricity Transmission. It is being developed by Greenlink Interconnector Limited, a subsidiary of Element Power and is due to commence construction in 2020, with commercial operation by 2023. The project will link the Great Island transmission substation in County Wexford (Ireland) and Pembroke transmission substation in Pembrokeshire (Wales). Greenlink has also received funding from the European Commission through the Connecting Europe Facility.