Cables and pipelines

Official announcements about planned or existing projects, or comments we may make on topics of discussion within the industry, can be found here.

Electricity Interconnectors – The Crown Estate’s rent framework

Permission from The Crown Estate is needed for the rights to lay, maintain and operate cables and pipelines on seabed for which we are landlord - with respect to electricity interconnectors and energy import cables, which The Crown Estate consider as interconnectors, this is cable sections on territorial seabed (out to 12 NM).

The planned growth in electricity interconnection and developments in regulation have led us to review leasing arrangements for the sector and we have developed a new rent framework. This framework has been developed in accordance with The Crown Estate’s duties under the Crown Estate Act 1961 and in line with our core values of commercialism, integrity and stewardship. The framework will be applied consistently to all interconnector projects, including energy import projects. Individual applications will be considered as and when projects come forward and there is no constraint on when developers can approach The Crown Estate. Enquires can be made to the Cables and Pipelines team.

The Cables and Pipelines team

By virtue of the Crown Estate Act 1961, The Crown Estate has a duty to “maintain and enhance its value and the return obtained from it but with due regard to the requirements of good management”.  The Crown Estate is under a specific duty to obtain “best consideration” for any sale or leasing of assets, with best consideration to be judged in the circumstances of the case, but “excluding any element of monopoly value attributable”. We believe that our approach achieves the appropriate consideration for The Crown Estate, without jeopardising the viability of individual projects as this is clearly not in our interest.

In developing our rent framework consideration has been made to the relevance of arrangements for similar infrastructure and the underlying economics of interconnector projects. To inform this assessment The Crown Estate has consulted with external advisers and developers. We’ve undertaken sensitivity analysis to observe the performance of possible interconnector projects under different market conditions. In doing this work we’ve made assumptions on the cost to build and operate interconnector projects, the conditions under which flow occurs and the resulting revenue to the interconnector owner. To ensure our approach is not material to the viability of projects we’ve modelled its effect in a worst case scenario.

The Crown Estate’s rent framework comprises of two elements; (1) Base Fee of £150k plus a (2) Capacity Fee of £250k per GW of interconnector capacity. The Base Fee is payable from commencement of the Option Agreement. The Capacity Fee is payable from the commencement of operation or longstop operational date if sooner. All fees are subject to annual index review and open market review on the 20th anniversary of the term commencement and every subsequent 10th anniversary thereafter.

For the grant of rights applicants will need to demonstrate that adequate financial protections are in place to indemnify The Crown Estate and secondly, adhere to all necessary consents. Further explanation of which can be given on request.

Currently, we do not anticipate granting rights for energy import projects until policy arrangements and subsidy is more certain at which point we will confirm rental arrangements. We continue to engage with stakeholders on this to ensure our position remains current.