Ofgem proposes £305m Sea Link allowance cut as harmonics issue remains unresolved

Ofgem has proposed cutting more than £305 million from National Grid Electricity Transmission’s requested allowance for Sea Link, while raising concerns over an unresolved power quality issue affecting the 2GW HVDC project.

By cutting the allowance, it means that NGET will receive £2.89155 billion in 2023/24 prices, rather than the £3.197 billion it was seeking. 

So, why has the allowance been cut? 

Well, it’s not because Ofgem believes Sea Link’s main construction contracts are overpriced. In fact, it’s quite the opposite. The regulator actually believes they’ve been competitively procured, and it has no material concerns over their cost. 

Instead, much of the proposed reduction relates to uncertain expenditure and the amount of risk funding NGET requested upfront. Of course, Ofgem appreciates that there may be unexpected costs that crop up, but it’s not willing to write a blank cheque – and instead, NGET will have to recover the costs at a later stage if they materialise. 

Harmonics require further work

Speaking on potential unexpected costs, Ofgem raised concerns over a significant technical issue concerning Sea Link’s ability to meet harmonic limits while operating at full capacity.

During detailed design and procurement, NGET found that even the largest harmonic-filter solutions proposed by bidders were unlikely to meet the required limits under all system conditions.

Further studies are now being carried out to establish what additional mitigation is needed. Ofgem says the measures currently proposed for Sea Link do not fully resolve the issue, and additional work elsewhere on the transmission network may also be required.

The final solution, location and cost have not yet been determined.

Ofgem has also made clear that reducing Sea Link’s output will not be an acceptable workaround.

The project must meet Grid Code requirements on voltage waveform quality while operating at its full 2GW capacity. If Sea Link has to be derated because of harmonic problems, Ofgem says NGET will not have delivered the required project outputs.

Pressure to accelerate delivery

Sea Link is designed to provide a new 2GW transmission connection between Suffolk and Kent using HVDC cables and converter stations. It was given a target delivery date of December 2031, although NGET says it’s been working towards a programme that could see it delivered a whole year early. 

Ofgem cited the reasoning for bringing the project forward is because NESO estimated that it could cost consumers between £1.1bn and £1.4bn in additional constraint costs. The added cost of speeding up the works would therefore be more than recuperated. That’s why Ofgem is considering how further acceleration measures could be funded where NGET can show they would bring the project forward and deliver a clear consumer benefit.

Of course, that’s all dependent on planning. The Examining Authority submitted its recommendation to the Secretary of State in July, with a Development Consent Order decision expected by October 30, 2026.