The cap is the maximum amount of revenue for an electricity interconnector. Should an interconnector’s revenue exceed the cap, the interconnector then transfer’s excess revenues back to the system operator, which is used to reduce transmission charges. The cap on revenues provides benefits in return for their exposure in managing the floor price. For the interconnectors, it supports an investment route to underpin viability. Figure 4: NEMO Link Project: European Cap and Floor Interconnectors The cap and floor model is designed to encourage greater investment into electricity interconnectors as they are structured to strike a balance between commercial incentives and risk mitigation to enable predictable revenue streams to support development.
The cap is the maximum amount of revenue for an electricity interconnector. Should an interconnector’s revenue exceed the cap, the interconnector then transfer’s excess revenues back to the system operator, which is used to reduce transmission charges. The cap on revenues provides benefits in return for their exposure in managing the floor price. For the interconnectors, it supports an investment route to underpin viability. Figure 4: NEMO Link Project: European Cap and Floor Interconnectors The cap and floor model is designed to encourage greater investment into electricity interconnectors as they are structured to strike a balance between commercial incentives and risk mitigation to enable predictable revenue streams to support development.
feasibility-second-tas-interconnector-final-report-app-e_financial_and_commercial_analysis-2016.docx