Regulatory stance threatens Anglo-French transmission link

A $549m transmission link that would help to transmit surplus electricity between Britain and France might not go ahead if proposals being put forward by regulators are approved.

UK energy market watchdog Ofgem and CRE, its French equivalent, are considering charging levies on revenues rather than profits generated by the privately funded Eleclink project, a move the project’s backers say would make the planned investment too risky.

Eleclink aims to transmit surplus electricity between Britain and France through the Channel Tunnel. The high-voltage 1000 MW interconnector proposal, which is 51 per cent owned by Star Capital and 49 per cent by Groupe Eurotunnel, was one of a number of business schemes that won the backing of David Cameron, UK prime minister, and Nicolas Sarkozy, former French president, at an Anglo-French summit two years ago.
The FT reports that a decision last year for a doubling of planned capacity through the tunnel, avoiding the need for costly cabling along the seabed used by other existing interconnectors between the UK and the Continent, had been expected to add 50 per cent to the existing ability of the two neighbours to exchange electricity.

Both regulators have yet to clarify how Eleclink would be regulated and charged for its access to the grid system compared with other interconnector projects.

“If we can’t get a reasonable settlement that allows us to get an acceptable rate of return, we will not proceed with the project,” said Tony Mallin, chief executive of Star Capital, whose stance was backed by Patrick Etienne, business service director at Groupe Eurotunnel.

Talks between both sides are continuing ahead of an official deadline of March 17 by which the situation must be resolved. “Governments on both sides of the Channel are very keen to see it happen,” added Mr Mallin.

Ofgem and CRE are expected to set out a regulatory framework for the Channel tunnel interconnector by March. This week’s threat of Eleclink’s backers to abandon the project follows submissions made to regulators in November arguing the interconnector deserved to receive a higher rate of return on its investment than that typically allowed to regulated energy infrastructure projects.

Lord Debden, the head of the UK government’s climate change advisory body, said Eleclink was one of a number of proposed interconnectors linking the UK to the rest of Europe that would allow the smoothing out of electricity supply.

The cross in cross-border interconnectors was “one of the mechanisms of moving the UK towards a low carbon economy” by allowing for the importation of French nuclear power and potentially excess hydropower from Norway, he said.

He added Eleclink and other interconnectors would help tackle the danger of the UK’s narrowing power generation capacity that Ofgem itself has warned could threaten shortages in electricity supply later this decade.

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