Ofgem got Nemo Link built by capping both risk and profit

In December 2014 Ofgem applied its cap-and-floor regime to Nemo, the planned GB-Belgium electricity interconnector. The decision set an annual floor of GBP50.4 million and an annual cap of GBP80 million in 2013/14 prices.

The mechanism split the hard problem in two. Developers kept market incentives and construction discipline, while consumers limited downside risk through the floor and were protected from excessive upside by the cap.

Nemo Link entered operation in January 2019. Ofgem's 2024 end-of-period assessment describes the 25-year cap-and-floor model, five-year revenue assessments, top-up payments below the floor and payments back to consumers above the cap.

Insure the floor; claw back the ceiling

The floor made a long-life, cross-border asset financeable.

The cap stopped the guarantee from becoming unlimited private upside.

Five-year assessments matched support to actual cumulative revenue.

Joint GB-Belgium regulation split adjustments across the two markets.

For risky infrastructure, a two-sided revenue band can unlock private capital without writing a blank cheque to the owner.

Nemo became the first interconnector built under the regime Ofgem had developed with Belgium's CREG. The same cap-and-floor logic was then used as a standing framework for later electricity interconnector investment windows in Great Britain.