The future of electricity interconnection in Great Britain: key legal and regulatory developments

In this Legal Update, we explore policy proposals that collectively represent the most significant proposed redesign of the electricity interconnection framework in Great Britain in over a decade that, if implemented, will fundamentally change the landscape for electricity interconnectors.

These proposals will be of fundamental importance to developers of interconnectors and financial investors willing to take development and/or construction risk.

The key takeaways from our Legal Update are set out below, and our full briefing note on these developments is available here. If you have any questions about this article or the developments discussed, please get in touch with any of the authors of this article, or your usual CMS contact.

Overview of the latest developments

On 25 March 2026, the Department for Energy Security and Net Zero ("DESNZ") and the Office of Gas and Electricity Markets ("Ofgem") published two complementary documents that collectively represent the most significant proposed redesign of the electricity interconnection framework in Great Britain in over a decade. DESNZ published a policy paper entitled "Next Steps for Electricity Interconnection in Great Britain", while Ofgem launched a Call for Input on the "Future Strategic Approach to Interconnection", with a response deadline of 1 May 2026. Together, these publications signal a fundamental shift in policy direction: moving from a developer-led approach to interconnector planning and delivery towards a strategically-led model coordinated through the National Energy System Operator ("NESO").

Strategic Planning Through NESO

Central to the proposed reforms is the move away from developer-led project parameters via the introduction of coordinated strategic planning through two new instruments: the Strategic Spatial Energy Plan ("SSEP"), expected in Autumn 2027, and the Centralised Strategic Network Plan ("CSNP"), expected by the end of 2028. Under this new approach, NESO will determine the location, timing and capacity of new interconnection, rather than these parameters being developer-led. Developers will retain ownership, construction and financing responsibility, but the strategic parameters of projects will be centrally determined. The CSNP will also determine whether interconnection should be delivered as a conventional point-to-point link or as an Offshore Hybrid Asset ("OHA"), which combines interconnector infrastructure with offshore wind generation.

Importantly, the new strategic planning framework will apply only to projects identified through strategic planning. Projects that have already received regulatory approval will continue under the regimes through which they were approved - providing regulatory certainty for those assets. 

Routes to Market and Revenue Models

Ofgem's Call for Input sets out a detailed analysis of potential delivery mechanisms. Ofgem has identified three principal routes to market: an ad-hoc approach, strategic investment windows and formal tendering processes linked to system needs identified through the CSNP. Ofgem has also examined competition models based on the stage at which developers are invited to bid, ranging from early (pre-detailed design) to late (post-design and consents), each carrying different implications for risk allocation between public bodies and developers.

On revenue models, Ofgem's starting position is that the Cap and Floor model remains the most suitable regime for point-to-point interconnectors. Since its introduction in 2014, the Cap and Floor regime has enabled 5.3GW of new interconnection capacity and returned over £200 million to consumers, with no floor payments required to date. However, Ofgem acknowledges challenges with the current model, including the absence of pre-operation revenues and increasing capital expenditure pressures. Ofgem is also exploring the Regulated Asset Base ("RAB") model as an alternative, particularly for more complex asset types (such as OHAs). The RAB model, widely used across Europe for interconnection, can allow for consumer payments during the construction phase and may lower the overall cost of capital, though it transfers more direct financial exposure to consumers at an earlier stage.

Conclusions

The proposed shift from a developer-led to a strategically-led model raises significant questions for developers, investors, lenders and other stakeholders. Developers will need to understand how and when interconnectors and OHAs will be identified, delivered and financed under the new framework, and who will be eligible to develop them. 

Under an early competition model, capital-constrained developers (and also infrastructure funds who have historically been willing to take early development phase exposure) will need to carefully weigh the risk of incurring significant development expenditure against the possibility that a project may never be able to reach final investment decision, and may ultimately need to pursue projects that are open to tender instead. 

On the other hand, a late competition model will favour investors with a lower cost of capital who are willing to acquire ready to build projects. The late competition model will also largely eliminate the inherent risk that exists under the current interconnector model of development delays eroding the hold period for financial investors who hold interests in interconnector projects via closed-ended funds.  

While the re-evaluation of the framework should enable better coordination of key transmission assets with offshore wind projects and the wider grid, the shift also creates considerable uncertainty for interconnector and OHA projects already under development but not yet in receipt of regulatory approval. The timeline for the new framework - with the SSEP not expected until Autumn 2027 and the CSNP until the end of 2028 - will not ease that uncertainty. Cross-border regulatory alignment, supply chain constraints and the evolution of trading arrangements with Europe will also shape outcomes. Stakeholders with an interest in the future of electricity interconnection should consider responding to Ofgem's Call for Input before it closes on 1 May 2026.

EXPECTED TIMELINES

1 May 2026: Deadline for responses to Ofgem’s Call for Input.

Second half of 2026: Ofgem consultation on high-level regulatory framework for delivery and financing.

Early 2027: NESO consultation on draft SSEP.

Autumn 2027: Publication of SSEP.

End of 2028: Publication of CSNP.