Background
On 18 September 2026, Ofgem published a consultation setting out its minded-to position on the Post Construction Review ("PCR") of the Greenlink Interconnector to the Republic of Ireland. The consultation is open until 16 October 2026, with final decisions expected in December 2026.
Greenlink is a 500MW electricity interconnector between Pembrokeshire in Wales and Great Island in County Wexford, Ireland. It commenced commercial operations on 29 January 2025 and is the fifth operational electricity interconnector project to be regulated under Ofgem's cap and floor regime, following Nemo Link, IFA2, North Sea Link and Viking Link. Greenlink is a Window 1 project and is the first cap and floor interconnector in GB to have been financed through project finance. The Commission for Regulation of Utilities ("CRU") regulates the Irish portion of the project (50% share), with Ofgem's cap and floor regime applying to the GB portion (50% share).
The PCR is the final stage of Ofgem's three-stage assessment framework for cap and floor interconnectors, following the Initial Project Assessment ("IPA") and Final Project Assessment ("FPA"). At the PCR stage, Ofgem revisits aspects of its cost assessment that were not fixed at the FPA stage and assesses the efficiency of costs incurred during construction, as well as the interconnector's operating expenditure ("OPEX"). The PCR determines the values of the Post Construction Adjustment terms, which adjust the preliminary cap and floor levels to arrive at final levels that remain fixed for the duration of the cap and floor regime.
Ofgem's Minded-to Position on Cap and Floor Levels
Greenlink Interconnector Limited ("Greenlink") submitted its PCR submission in April 2025, with an updated submission on 25 July 2025 in response to a request for further information from Ofgem. The preliminary cap and floor levels were set at Financial Close on 16 August 2022, at £31.24 million (cap), £15.58 million (notional floor) and £18.60 million (actual floor) in 2020/21 prices.
Greenlink proposed an upward adjustment of £1.48 million to the preliminary cap level, an upward adjustment of £1.68 million to the preliminary notional floor level and a downward adjustment of £1.18 million to the preliminary actual floor level. However, Ofgem's minded-to position diverges materially from Greenlink's proposals. Ofgem is minded to approve a reduction of only £0.03 million to the preliminary cap level, an increase of £0.38 million to the preliminary notional floor level and a reduction of £1.26 million to the preliminary actual floor level.
This results in Ofgem's minded-to final levels (in 2020/21 prices) of £31.45 million (notional cap), £16.16 million (notional floor) and £17.34 million (actual floor).
Key Cost Assessment Findings
CAPEX
Greenlink's submitted CAPEX at PCR was £182.2 million, a decrease of £8.7 million from the FPA (FC) position. Ofgem is minded to make further reductions of £1.16 million to CAPEX, comprising:
- Delay in Start-Up ("DSU") insurance (£0.99 million disallowed): Ofgem considers these costs provide no tangible benefit to consumers and confirmed its FPA position that DSU insurance costs would be disallowed.
- Commissioning-related investigations (£0.14 million disallowed): Greenlink's submitted cost of £155k was a forecast, but actual spend was only £17k. Ofgem is minded to allow the actual costs incurred.
- EPC contract associated costs (£0.03 million disallowed): Ofgem considers that these costs duplicate compensation already inherent in the cap and floor mechanism.
OPEX
The OPEX assessment is the most significant area of divergence between Greenlink's submission and Ofgem's minded-to position. Greenlink submitted OPEX of £181.0 million, a £29.53 million (19.5%) increase from the FPA (FC) decision of £151.47 million. Ofgem is minded to disallow £25.0 million of Greenlink's OPEX submission, resulting in an allowance of £156.0 million. The disallowances relate to two principal categories:
- Personnel costs (£7.7 million disallowed): Greenlink did not provide a mapping between its payroll breakdown and the personnel categories in the cost assessment template, nor a reconciliation explaining changes from FPA to PCR. Personnel costs have therefore been set at the FPA level.
- Business services and general administration (£17.3 million disallowed): Greenlink submitted £23.74 million in these costs, a £17.3 million increase from the FPA approved value of £6.44 million. Greenlink did not provide a granular reconciliation of the drivers of change and confirmed it was not possible to track individual cost components from FPA to PCR. In the absence of a clear, quantified reconciliation, the PCR uplift has been set at the FPA value.
REPEX and DECOMMEX
Greenlink's submitted REPEX of £21.7 million represents a significant increase of approximately £14.3 million above its FPA (FC) figure of £7.4 million. Greenlink attributed this increase to updated asset replacement requirements, revised replacement timings and higher forecast costs identified following a reassessment of long-term operational and maintenance needs. Ofgem undertook a full review of the submitted REPEX costs and assessed them as being in line with costs seen in previous cap and floor projects, taking current market conditions into account. Accordingly, Ofgem is minded to allow these costs as submitted at PCR in full, with no disallowance.
Greenlink submitted DECOMMEX of £3.5 million, a slight decrease of £0.3 million from the £3.8 million allowance set at FPA.
Decommissioning costs relate to sufficiently removing (or taking other relevant actions in relation to) the interconnector's assets at the end of its operational life. Ofgem is minded to accept the submitted DECOMMEX costs in full. It is worth noting that Greenlink's licence provides for future adjustments to the cap and floor levels (whether upwards or downwards) in the event that a change in legislative requirements results in additional or reduced decommissioning costs agreed by the Authority, reflecting the fact that legislative requirements relating to decommissioning could change before the end of the cap and floor regime.
Financial Model and Licence Modification Proposals
Greenlink raised a number of proposals in relation to the Greenlink Cap and Floor Financial Model, including requests to amend the treatment of REPEX in the actual floor, the annuity-based averaging methodology, the use of real versus nominal values, the real floor return rate, transaction costs, the inflation index (RPI to CPI) and the currency of regulatory submissions.
Ofgem has agreed that REPEX should feed into the actual floor calculation and has amended the methodology to include REPEX in the year in which expenditure is incurred. However, Ofgem has declined Greenlink's other financial parameter proposals, on the basis that these parameters were agreed and set at Financial Close. Of particular note, Ofgem rejected Greenlink's request to submit future regulatory filings in EUR rather than GBP, confirming that EUR submissions are only accepted for jointly regulated projects, which Greenlink is not.
Ofgem is minded to agree with Greenlink's request to align its "Relevant Year" definition with calendar years rather than financial years, to align with Greenlink's statutory accounting.
Ofgem has introduced a new financial model developed to incorporate the regime variations associated with Greenlink's project-financed structure. The new financial model will be used during the operational period to adjust cap and floor levels, inflate levels annually, reflect availability performance and assess annual revenue against the cap and floor levels to determine any top-up or clawback payments.
Alongside the PCR consultation, Ofgem is conducting a statutory consultation on consequential changes to Greenlink's special licence conditions. The proposed modifications address:
- The Floor Start Date, determined to be 1 January 2025.
- The change of the "Relevant Year" definition from financial years to calendar years.
- Incorporation of the statement on regulatory processes agreed at Financial Close, including provisions on the two-component structure of the actual floor level and the requirement to maintain gearing at the Financial Close level.
Comment
The Greenlink PCR is notable for several reasons. It is the first PCR for a project-financed interconnector under the cap and floor regime, and the introduction of the new financial model reflects the additional complexity that project finance structures bring to the regulatory framework. Ofgem's significant OPEX disallowance of £25.0 million, primarily on evidential grounds, underscores the importance to interconnector developers of providing granular cost reconciliations that map movements from FPA to PCR at the individual cost-category level.
The consultation also highlights the tension between the developer's desire for flexibility in financial parameters and Ofgem's position that key parameters agreed at Financial Close should not be reopened at the PCR stage.
The consultation closes on 16 October 2026. Following consideration of responses, Ofgem anticipates making its final decisions in December 2026.
