Northern Ireland outlines proposals for new interconnector regime

Northern Ireland’s Utility Regulator said it planned to look at interconnector projects for Northern Ireland on a case by case basis, as a broader regulated regime would not work for all schemes. The proposals are contained in a new information paper (28-page/558KB PDF).

It comes after a consultation process by the regulator last year looking at what financing models would be introduced for Northern Ireland, and drawing on similar work by British regulator Ofgem and Ireland’s Commission for Regulation of Utilities.

Matthew McMurray, an energy industry expert with Pinsent Masons in Belfast, said the findings showed the challenges faced by the regulator in establishing a working model for Northern Ireland.

"The information paper highlights the continuing challenge of balancing investment certainty with consumer protection, particularly in the context of large, capital-intensive projects,” he said. "The key threshold will be whether projects can demonstrate clear, evidence-based benefits for consumers, with any regulatory support needing to be both necessary and proportionate."

Following the consultation, the Utility Regulator said it was now looking at a series of different methods for interconnector financing – with projects to be assessed based on how they deliver benefits for consumers in Northern Ireland and how they would operate with or without proportionate regulation.

Among the models being examined are a hybrid Cap and Floor Scheme – which determines the minimum and maximum amount of money a project could make. This would align the Northern Ireland grid with the approach taken by Britain’s Ofgem for interconnector development.

Also in consideration is a regulated asset base approach, which builds on the existing method in NI for funding key infrastructure assets such as the electricity networks. Similarly, mutualisation is being assessed as a potential option based on previous infrastructure projects including parts of the gas transmission network in NI and the Moyle interconnector between Scotland and NI, with consumers funding the development but also receiving the benefits.

Finally, a merchant model – where all development risk and commercial benefit is borne by the developer – is also under consideration, although the regulator acknowledged this approach may limit funding opportunities without long-term market confidence.

The regulator said it was looking to make a draft decision on a preferred regime before the end of 2026, with a final decision to be confirmed in the first quarter of 2027.

“The next phase of analysis, particularly around the necessity and proportionality of any support and how it provides consumer benefits, will be critical in shaping the future approach,” said McMurray.