The Department for the Economy (DfE) has published a new Interconnection Policy Statement, setting out its approach to future East-West electricity interconnection between Northern Ireland and neighbouring markets. The statement establishes a framework for assessing proposals, with a central objective that future interconnection should only be supported where it can demonstrate clear, long-term net benefits for consumers.
Interconnection provides access to neighbouring electricity markets and supports movement of power between jurisdictions thereby playing a significant role within the Single Electricity Market (SEM). As renewable generation and electricity demand increase, DfE expects interconnection to continue to form part of a more flexible, resilient and integrated electricity system.
However, the Department emphasises that the benefits of additional interconnection cannot be assumed. Instead, projects should be assessed against three guiding principles: evidence-based whole-system outcomes and long-term resilience; cross-jurisdictional partnership and cooperation; and positive consumer outcomes through the proportionate allocation of costs, benefits, and risks.
This approach closely reflects a number of recommendations made by EAI in our May 2025 policy paper, Interconnection in the SEM. EAI supports the role that interconnection can play in facilitating electricity trade, renewable integration, and system flexibility, while emphasising the need for a measured approach that reflects the particular characteristics and challenges of the all-island electricity system.
A Whole-System Approach
A particularly welcome aspect of DfE’s statement is its emphasis on rigorous whole-system assessment. Rather than considering wholesale prices alone, DfE states that assessment should capture the interaction of interconnection with conventional and renewable generation, storage, demand-side flexibility, and network infrastructure. They should also consider constraint and curtailment costs, balancing costs, and other costs ultimately borne by consumers.
This is consistent with EAI’s position that interconnection should be subject to robust cost-benefit analysis using realistic assumptions and appropriate counterfactuals. EAI has previously called for modelling to account for local network constraints, dispatch down, infrastructure requirements, and alternative investments such as storage, flexible generation, and grid reinforcement.
The importance of this approach is particularly relevant in Northern Ireland, where renewable dispatch down has been a significant challenge. Additional interconnection may provide opportunities to export surplus renewable electricity but import flows can also contribute to the displacement of indigenous renewable generation. Short-term wholesale price benefits therefore need to be considered alongside their wider impacts on system costs, renewable investment, and consumers.
Interconnection as Part of the Wider System
DfE also recognises that interconnection should be assessed alongside alternative and complementary solutions, including regional generation, storage, and demand-side flexibility. Importantly, the timing and value of future projects should be considered alongside other strategic infrastructure and wider network reinforcement.
A key consideration in this context is the second North-South Interconnector (NSI). While commonly referred to as an interconnector, the NSI is more accurately described as a second tie-line and represents internal transmission reinforcement within the all-island electricity system, rather than additional external interconnection. Although therefore outside the primary scope of DfE’s statement, its delivery has the potential to influence the value, timing and consumer outcomes associated with future external interconnection and must therefore be considered as part of any whole-system assessment.
This aligns strongly with EAI’s position that external interconnection cannot substitute for investment in domestic generation and the internal electricity network. EAI has consistently highlighted that interconnectors cannot, by themselves, guarantee security of supply, particularly where neighbouring electricity systems may experience periods of system stress simultaneously.
This statement therefore represents a positive development towards and more evidence-based approach to interconnection policy. As the SEM transitions towards a highly renewable electricity system, interconnection will remain an important part of the energy mix. Ensuring that future projects are assessed transparently, alongside domestic generation, storage, and network investment, will be essential to ensuring that they support security of supply, decarbonisation and, ultimately, long-term value for customers.