Consultation on Final Project Assessment of the NSL interconnector to Norway

Publication date
18th October 2016
Closing date
15th November 2016
Policy area
Status

The cap and floor regime is the regulated route for interconnector development in GB. There are two main stages to our cap and floor regime – the Initial and Final Project Assessments (IPA and FPA). We assessed the needs case for the NSL project to Norway at the IPA stage and decided in March 2015 to grant the project a cap and floor regime in principle. This was based on our assessment that the project is likely to significantly benefit GB consumers and GB as a whole.

This consultation provides our minded-to position on the FPA of the NSL interconnector.

About the project

The NSL project is being jointly developed by National Grid Interconnector Holdings (NGIH) and by Statnett, the Norwegian transmission system operator. It will be a 1.4GW interconnector between Blyth, Northumberland in England and Kvilldal in Norway. Our cap and floor regulatory regime applies to National Grid’s 50% share of the cost and revenues of the project.

Our assessment

Based on our cost assessment we think a total capex figure of £604 million represents reasonable expenditure for the NSL interconnector at this stage. The total capex figure of £604 million is approximately 13% lower than the developer’s FPA submission of £697 million. This also represents a reduction of 33% from the estimated costs of £900 million provided for the IPA stage.

We propose setting a preliminary cap level of £94.2 million and floor level of £53 million for the project. These cap and floor levels are approximately 30% lower than those used at our IPA stage, which were approximately £140 million and £75 million. We think the project can therefore be reasonably expected to provide greater benefits to consumers than we expected at the IPA stage.

About this consultation

This consultation will run for four weeks. Subject to stakeholder responses, we will aim to make our final decision on NSL’s FPA in late 2016. We will aim to confirm the provisional cap and floor levels and will modify NSL’s interconnector licence to give effect to our decision. We will then confirm the final cap and floor levels for the project prior to operation at our post-construction review (PCR) stage.