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Ofgem: FAB Link retains cap and floor regime in principle

FAB Link, an interconnector that will link Great Britain and France, is retaining its cap and floor regime in principle, Ofgem announced following the needs case reassessment for the project.

The FAB Link project, being jointly developed by FAB Link Limited and Réseau de Transport d’Électricité (RTE), will be an electricity interconnector between Exeter in Great Britain and the Cotentin peninsula in France via the Channel Island of Alderney.

The cap and floor regulatory regime applies to the Great Britain portion of the cost and revenues of the project (65% share).

Ofgem published on 4 March the positive needs case reassessment for FAB Link, concluding that the project is likely still in the interests of current and future GB consumers.

This decision was conditional on the project developer presenting evidence by the end of July of a clear pathway to progress regulatory approvals in France.

As outlined in the March letter, the decision to revisit the needs case was made in light of a delayed connection date of 2025, communicated by FLL, therefore exceeding the IPA deadline of the end of 2023.

Ofgem decided to update the socio-economic welfare (SEW) modeling analysis, as this was the aspect of the needs case most directly impacted by project delays.

In early July, Ofgem joined discussions with regulatory counterparts in France, Commission de régulation de l’énergie (CRE), FLL and RTE. At the meeting, a clear pathway to regulatory assessment was outlined and agreed upon, and a further written narrative summary was provided by FLL thereafter.

“In light of the information provided by FLL and evidence that we have observed, we are satisfied that FLL have met the conditionality laid out in the needs case reassessment letter of 4 March 2022, which confirmed that FAB Link remains in the interests of consumers over the 25-year regime duration,” Ofgem said.

“It is important to note that whilst we believe that the project is likely still in the interests of current and future GB consumers, we cannot, at this stage, confirm that FLL will retain the full 25-year regime, as it has not met the IPA conditionality for the project. We understand from bilateral engagement with FLL that they intend to submit a request for force majeure (FM request), but we cannot comment on a future request. We will assess any FM request on its merits and make an informed decision at the time such a request is made.”

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In the March letter, Ofgem introduced the possibility of amending FAB Link’s IPA condition related to the duration of the delay to the project’s connection date.

The updated connection date for FAB Link, as presented to Ofgem in July, is the end of 2030. Based on expected project timelines, Ofgem deems it appropriate to revisit the project’s needs case should FAB Link fail to achieve a final investment decision (FID) by the end of 2026, therefore taking off course for project delivery by the updated target connection date.

“Our view is that FAB Link would likely still be in consumers’ interest if the project is delivered around 2030, as currently indicated. This view is an extension of the positive needs case reassessment published in March 2022, alongside analysis of the wider need for further interconnection performed for Ofgem’s interconnector policy review, 3 and in line with the Government’s ambition for at least 18 GW of electricity interconnection by 2030,” Ofgem stated.

FAB Link will connect the electrical substation at Menuel, on the Cotentin peninsula in France, and that near Exeter, in Devon, England, with nearly 220 kilometers of cable.

The project, which allows a maximum transmission of 1,400 MW, has been recognized as a “Project of Common Interest” by the EU following support received from the French and UK governments.