Near-term Interconnector Cost-Benefit Analysis for Ofgem
Poyry Management Consulting was commissioned by Ofgem to provide the cost-benefit analysis for interconnectors applying for the regime in the second window, using modelling work based on BID3
Interconnectors derive revenue both from hourly price differentials between two connectedelectricity markets, as well as participating in capacity markets in both countries, if applicable. The cap and floor regime provides revenue protection for interconnectors successful in their application up to the level of an agreed floor. Where revenue earned is below the floor there will be a transfer from consumers to interconnector owners. In exchange, any revenues earned by interconnector owners above the agreed cap result in a money transfer to consumers (via network tariffs)
We have analysed the impact of each individual project under a set of pre-agreed scenarios designed to reflect a range of feasible out-turns of interconnector value; the price and flow impacts are then used to derive the component welfare impacts and assessed for two cases with regards to the progress of other interconnectors
