Ofgem takes next step in regulating Great Britain's new North Sea energy transmission frontier 

Ofgem has today (Friday 4th April 2025) published further details of its Cap and Floor regime for the Offshore Hybrid Asset (OHA) pilot scheme. 

OHAs improve efficiency and reduce environmental and community impact by combining electricity interconnection (which links Great Britain's electricity transmission network to continental European markets via subsea connections) with offshore wind into a single asset.  

Establishing OHAs will act as a boon to energy trading. When offshore wind power is plentiful, OHAs will enable electricity generated from a connected wind farm to be directly fed into the British or European grids. Then at times when wind farms are not generating, OHAs provide additional channels for energy trades between Great Britain and the continent, maximising the use of the asset and helping to boost energy security and competition. 

It is hoped that OHAs will pave the way for so called energy islands and meshed grids of the future - connecting North Sea windfarms with both Great Britain's and Europe's transmission grids, helping to set up the North Sea as the green powerhouse of Europe.  

The two OHA pilot projects,  Great Britain's first - are:  

·      LionLink: Great Britain's part of an OHA which will connect Dutch offshore windfarms to the British grid with an onshore landing point in Suffolk, providing up to 1.8GW of clean electricity to each country.

·      Nautilus: Great Britain's part of an OHA which will connect Belgian offshore windfarms to the GB grid, coming ashore at the Isle of Grain in Kent, providing up to 1.4GW of offshore wind to each country. 

Beatrice Filkin Ofgem Director of Major Projects said:  

"Using our tried and tested interconnector Cap and Floor regime as the blueprint, we've developed a bespoke system for the Offshore Hybrid Asset (OHA) pilot scheme. 

"The OHA Cap and Floor regime will protect consumers whilst giving the project developer a sound investment prospect."

Both LionLink and Nautilus are expected to be operational in the early 2030s. 

To read the full decision document visit https://www.ofgem.gov.uk/decision/further-detailed-regime-parameters-offshore-hybrid-asset-pilot-scheme-decision

Notes to editors  

Ofgem's cap and floor regime for Pilot NSI's (Non-Standard Interconnectors), which will regulate LionLink and Nautilus, is based on its successful cap and floor regime, which since 2014 has provided the regulated route for interconnector development in Great Britain. 

The regime is designed to facilitate the delivery of the two projects in an economic, efficient and timely manner, whilst protecting consumers' interests. 

A cap and floor mechanism regulates how much money a developer can earn once an asset is in operation, providing developers with a minimum return (floor) and a limit on the potential returns (cap) for a 25-year period, with surpluses paid back to consumers. 

Ofgem's interconnector cap and floor regime has been successful in both attracting investment and in protecting consumers.  

Since its launch in 2014 the regime has delivered £200m back to consumers through reduced bills. Since the regime's inception floor payments have never been made, thereby ensuring excellent value for money for consumers, as well as demonstrating the commercial viability of interconnectors.  

Offshore Hybrid Assets (OHA) 

OHAs combine interconnection with the transmission of electricity generated by offshore windfarms and create direct links between power grids and windfarms. OHAs can improve coordination of offshore wind and interconnection and are an important first step towards a more strategic meshed electricity system in the North Sea. They can reduce build and operation costs, and by coordinating infrastructure they have the potential to reduce impacts on the environment and on communities.