UK energy regulator may reject penalty exemption for National Grid-SP Energy joint venture

By Raechel Thankam Job

(Reuters) -Britain's energy regulator Ofgem does not believe an electricity transmission project developed by National Grid Electricity Transmission and SP Energy Networks qualifies to be exempt from penalties related to delays, it said on Thursday.

The joint venture between the units of National Grid and Spain's Iberdrola had requested a 480-day exemption from penalties related to completion delays on the Eastern Green Link 1 (EGL1) due to global supply chain issues and capacity shortages.

The project comprises subsea and underground cables linking Scotland to north-east England, and is a key part of Britain's target to decarbonise its electricity sector by 2030.

However, Ofgem said it was considering denying the request as supply issues did not exist at the time of the EGL1 tender and the companies should have taken steps to mitigate the impact of the constraints.

Ofgem had approved a 2-billion-pound ($2.57 billion) funding package for the project in November.

Construction of EGL1 began in March and is now expected to be delivered in April 2029, 16 months later than required, resulting in four months of Output Delivery Incentive penalties, the regulator said.

The penalties are designed to encourage efficient and timely delivery of projects by providing financial incentives. Failure to deliver projects on time can result in a penalty of up to 10% of the project's expenditure.

If approved, the joint venture would be exempt from penalties related to delays until April 25, 2030. It is currently exempt until December 31, 2028.

A spokesperson for EGL1 said they will provide further evidence on the supply chain issues and their impact on delivery timescales during Ofgem's consultation period.

(Reporting by Raechel Thankam Job and Shashwat Awasthi in Bengaluru; Editing by Janane Venkatraman and Saad Sayeed)