Ofgem gives green light to Project Nemo

Ofgem has announced its final decision on the financing and regulatory regime for Nemo Link, an interconnector which, on completion in 2019, will bring an additional 1 GW electricity capacity to Great Britain.

The final decision on proceeding with the project is now with the developers. The total cost of the project is expected to be £500 million (US$784.7 million).

Nemo will run between Zeebrugge in Belgium and Richborough in Kent and will allow energy trades and flows between the two markets, increasing access to energy generation and making energy supplies more secure and resilient for consumers.

Nemo is expected to be the first interconnector built under the cap and floor regime, which has been developed by Ofgem in partnership with the Belgian energy regulator, CREG. The goal of the cap and floor regime is to encourage new investment in interconnector projects that will deliver good value for consumers.

For Project Nemo, the annual revenue floor has been set at £50.4 million over the 25 year duration of the regime; and the annual revenue cap at £80 million. These levels reflect Ofgem’s view of efficient construction costs and return on capital. They will be adjusted following a final assessment of costs post-construction.

The project partners are National Grid Nemo Link Limited, which is part of National Grid Plc, a major UK company which owns and manages gas and electricity infrastructure in the UK and in the north eastern US, and Elia, which is the Belgium’s transmission system operator, operating over 8,000 km of lines and underground cables throughout Belgium.

Dermot Nolan, Ofgem chief executive said:

“Today’s announcement is good news for consumers. Our cap and floor regime has already attracted interest from other potential projects, and looks set to be an effective gateway to new investment that will make energy supplies more secure and increase competition in the market, to the ultimate benefit of households and businesses.”

Secretary of State, Ed Davey, said:

“This is a major landmark in our ambition to greatly increase interconnection with our neighbours, to improve our energy security and lower bills. By linking us to Belgium, Project Nemo will enable enough electricity to flow between our countries to power up to three million homes. The new cap and floor regime will unlock billions of pounds of investment in interconnectors, and I expect more projects to come forward next year.”

Nemo Link was granted a permit to lay the offshore electricity cables in Belgian territorial waters by the Federal Secretary of State of Energy on 20th May 2014. The environmental permit for these cables was approved by the Federal Minister of the North Sea on 20th March 2014.