OFTO Projects and Cap and Floor Interconnectors: IDC Rates 2026-2027
Summary
Ofgem published updated Interest During Construction (IDC) rates for 2026-2027 affecting offshore electricity transmission (OFTO) projects and Window 3 cap and floor electricity interconnectors. The IDC rate for OFTO projects is set at 9.55% (pre-tax, nominal), reduced from 9.74% in 2025-2026. The IDC rate for Window 3 interconnectors is set at 5.49% (vanilla, real-CPIH), increased from 5.37% in 2025-2026. These rates apply to projects reaching Final Investment Decision (FID) during the 2026-2027 period.
What changed
Ofgem has finalized updated Interest During Construction (IDC) rates for the 2026-2027 period based on a reference date of 31 January 2026. For OFTO projects reaching FID in 2026-2027, the IDC rate is capped at 9.55% (pre-tax, nominal), representing a decrease from the prior year's 9.74%. For Window 3 interconnectors, the IDC rate is set at 5.49% (vanilla, real-CPIH), an increase from the previous 5.37%. Outstanding Window 1 and Window 2 projects will have IDC rates determined upon their respective FID dates following the methodologies detailed in prior decision letters.
These rate changes directly affect the financing costs and revenue calculations for offshore transmission infrastructure and electricity interconnector projects. Developers and investors in these projects should update their financial projections to reflect the revised IDC rates. The divergence in rate movements between OFTO projects (decrease) and interconnectors (increase) reflects differing methodologies and market conditions, and will influence comparative project economics and investment decisions for the 2026-2027 FID cohort.
What to do next
- Update financial models and project financing calculations for OFTO projects using the 9.55% IDC rate
- Apply 5.49% IDC rate for Window 3 cap and floor interconnector projects reaching FID in 2026-2027
- Review and adjust cap and floor revenue projections based on updated IDC methodology
Archived snapshot
Apr 8, 2026GovPing captured this document from the original source. If the source has since changed or been removed, this is the text as it existed at that time.
OFTO projects and cap and floor interconnectors: Interest During Construction (IDC) rates for 2026 to 2027
Publication type: Decision Publication date:
8 April 2026
Topic: Offshore electricity transmission, Electricity interconnectors Print this page
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- Our decision on updated IDC rates for 2026 to 2027 which will apply to offshore electricity transmission (OFTO) projects and electricity interconnectors granted the cap and floor regime.
Details
This letter sets out our decision on the updated IDC rates for OFTO projects and Window 3 cap and floor electricity interconnectors to apply to projects taking Final Investment Decision (FID) in 2026 to 2027.
Based on this updated methodology and a reference date of 31 January 2026, we have decided that:
- for OFTO projects, we will set the IDC rate capped at 9.55% (pre-tax, nominal) for projects reaching FID in 2026 to 2027 (9.74% in 2025 to 2026)
- for Window 3 interconnectors, we will set the IDC rate at 5.49% (vanilla, real-CPIH) for projects reaching FID in 2026-27 (5.37% in 2025 to 2026) 'Vanilla' is the most basic or standard form of an asset or financial instrument. CPIH is the Consumer Prices Index including owner occupiers' housing costs.
The IDC rate for any outstanding Window 1 project will be set after the project’s FID date in accordance with our policy. For any outstanding Window 2 projects, the IDC rate will be determined once the project has reached FID. This will follow the methodology detailed in the 2023 to 2024 IDC decision letter.
Decision document
OFTO projects and cap and floor interconnectors: Interest During Construction (IDC) rates for 2026 and 2027 [PDF, 208.00KB] Print this page
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