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Ofgem: FAB Link retains cap and floor regime in principle

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

The FAB Link project, 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 UK share of project costs and revenues (65% share).

Ofgem published the positive reassessment of the FAB Link need case on March 4, concluding that the project is likely still in the interest of current and future UK consumers.

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

As noted in the March letter, the decision to reconsider the needs case was made in light of a delayed connection date of 2025, communicated by FLL, thus exceeding the IPA deadline of late 2023.

Ofgem decided to update the Socio-Economic Welfare (SEW) modeling analysis as this was the aspect of the needs case most directly affected by the project delays.

In early July, Ofgem joined discussions with its regulatory counterparts in France, the Energy Regulatory Commission (CRE), the FLL and RTE. At the meeting, a clear path to regulatory review was outlined and agreed upon, and another written narrative summary was provided by the FLL afterwards.

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

“It is important to note that whilst we believe the scheme is likely to still be in the interest of current and future UK consumers, we cannot at this stage confirm that FLL will retain the full 25 year scheme as it did not satisfy. IPA conditionality for the project. We understand from the bilateral engagement with FLL that they intend to submit a force majeure request (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.

In the March letter, Ofgem introduced the possibility of changing the FAB Link IPA condition related to the length of delay from the project connection date.

The updated connection date for FAB Link, as presented to Ofgem in July, is the end of 2030. Based on the expected timelines of the project, Ofgem deems it appropriate to re-examine the case of project needs should FAB Link fail to not to a final investment decision (FID) by the end of 2026, thus taking off for the delivery of the project at the updated target connection date.

“Our view is that FAB Link would likely still be in the best interests of consumers if the project is delivered around 2030, as currently stated. This view is an extension of the positive needs case reassessment published in March 2022, alongside the analysis of the wider need for additional interconnection carried out for Ofgem’s Interconnection Policy Review, 3 and in line with the government’s ambition of at least 18 GW of electrical interconnection by 2030″, Ofgem said.

FAB Link will connect the electricity substation at Menuel, in the Cotentin region of 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 the support received from the French and British governments.