Introduction
High-voltage direct current (HVDC) links, or "interconnectors"—onshore and offshore cables designed to enable the flexible, bi-directional flow of electricity between countries—are rapidly becoming the backbone of global energy markets. As nations race to meet decarbonisation targets, these interconnectors aim to lower energy costs and meet growing demand, driving the transition towards greener energy systems. With increasing political and geopolitical pressures on energy security, investment in HVDC interconnectors has risen globally, supported by significant government funding and strategic commitments. By facilitating electricity trading across borders, these projects present compelling investment opportunities. The global market for HVDC transmission systems is projected to grow from £19 billion in 2025 to £52 billion by 2035, signalling a promising future1.
Find out more about the need for interconnectors here: Why do we need… | Gardiner & Theobald Market Intelligence
The Global Rush for HVDC: Key Markets in Focus
The UK
The UK’s energy system already benefits from seven operational interconnectors linking it to Norway, France, Belgium, Ireland and the Netherlands. In 2024, Viking Link became the world’s longest HVDC interconnector (765 km), connecting the UK and Denmark. In November 2024, Ofgem published the Initial Project Assessment of the Third Cap and Floor Window for Electricity Interconnectors, approving LirIC (0.7 GW to Northern Ireland), MaresConnect (0.75 GW to the Republic of Ireland) and Tarchon (1.4 GW to Germany). Additionally, two Offshore Hybrid Assets (OHAs)—LionLink (to the Netherlands) and Nautilus (to Belgium)2—were granted a cap and floor regime in principle.
Europe
In Europe, interconnector capacity is also expanding. According to ENTSO-E, cross-border capacity will increase from 93 GW in 2022 to 136 GW by 2030 and 155 GW by 2040, enabling deeper integration of renewable energy sources. Discussions are also underway regarding an interconnector between Europe and North America3. The time difference between the two continents offers strategic advantages, allowing surplus energy in one region to meet peak demand in the other.
Other Global Trends4
- USA: £106 billion investment in transmission network upgrades, with a significant focus on HVDC solutions by 2025, driven by modernisation efforts under the Biden administration.
- India: £16 billion investment in HVDC infrastructure by 2030.
- China: 90% of electricity capacity from non-fossil sources by 2035, with massive investments in ultra-high-voltage DC (UHVDC) projects.
Key Challenges in HVDC Development
Supply Chain Issues
Despite growing excitement around HVDC links, challenges remain. HVDC systems require specialised components supplied by a limited number of global manufacturers. Procurement strategies must balance engagement with civil, equipment and marine installation firms to stimulate the supply chain while fairly distributing risks. Historically, European clients procured HVDC converters and HVDC cables separately to mitigate risks.
Most HVDC suppliers provide inhouse design and manufacturing while civil works, equipment and marine installation varies between in-house/outsource and in many cases consortia are formed to deliver the works. International companies encounter additional challenges, including the need to navigate local regulations and policies, varying technical standards and differing contract and commercial approaches. They also face additional shipping and transportation costs by crossing multiple borders, extended delivery timelines and difficulties in securing local sub-contractor capacity.
G&T has worked closely with clients to develop procurement strategies that integrate key work package decisions, identify market routes to market and contract and commercial options taking into account the regulated environment and ensure compliance with applicable laws and policies. We also support procurement delivery, ensuring robust processes with clear outcomes and KPI metrics to measure progress and performance across the project lifecycle.
Material and Labour Constraints
The aftermath of COVID-19 and political tensions have led to global material shortages, causing price volatility in key commodities. Between April 2020 and March 2022, prices surged by 50%, with a further 20% increase from January to May 20245, driven by high global demand for clean energy solutions and constrained supply chains.
The installation of HVDC systems requires highly skilled labour, but demand has outstripped supply, inflating costs. Additionally, many of these projects require large-scale relocations of workers, which has become more challenging in the post-Brexit and post-pandemic landscapes, with visa delays, housing shortages and the need for new infrastructure.
Procurement Challenges
The surge in HVDC projects has led to a sharp rise in procurement activity. Between 2023 and 2024 alone, two major frameworks—TenneT’s £25 billion and National Grid’s £59 billion—were announced. However, the competitive environment has driven up costs and reduced supplier appetite, with shorter tender timelines leading to fewer bids and a lack of market competition. If not managed properly, these conditions could delay procurement and result in unrealistic delivery plans.
G&T has been at the forefront of interconnector procurement, supporting major UK and European projects, including IFA2 between England and France, NeuConnect between the UK and Germany and other HVDC projects as well as other privately financed interconnectors.
Our experience shows that suppliers favour projects with balanced risk distribution, straightforward procurement processes and flexible timelines. Increasingly, suppliers are demanding substantial upfront payments to secure manufacturing slots before regulatory approvals, introducing financial risk.
Investment Constraints
HVDC projects require substantial upfront investment and long development-to-commissioning timelines heighten investment risks. Regulatory approvals can take years, affecting financial viability. For example, in the UK, Window 3 projects are privately financed and do not have a set regulatory presume as Accelerated Strategic Transmission Investment (ASTI) projects. Ofgem’s cap-and-floor regime (and similar bodies in other countries) dictates private developers' profits, with final revenue only determined after a project is operational, making these projects less attractive for project finance models.
Interconnector projects typically involve partnerships between multiple countries and operators, each with distinct technical specifications and regulatory requirements. Additional challenges may arise from indexation and inflation. This complexity necessitates strong collaboration, influencing procurement decisions, risk modelling, and project design to meet diverse stakeholder needs while ensuring value for money.
Current prices are becoming unsustainable, potentially creating a bubble with serious consequences if it bursts. To mitigate this risk, it is essential to collaborate on strategies such as setting realistic deadlines and prioritising projects.
Strategies for Mitigating Risks
Understanding the Supply Chain
G&T has successfully supported numerous clients in developing procurement strategies and managing procurements for interconnector projects. One key lesson from our experience is the importance of understanding and mapping the supply chain. By doing so, we ensure that we engage the right stakeholders and can monitor the financial health of suppliers, tracking any changes that might impact their capacity, capability or market appetite. Increased demand has spurred investments in new vessels, cable and converter manufacturing facilities, particularly in Europe, the Middle East, and Asia.
Early engagement is critical. By introducing projects to the market at an early stage, stakeholders can address concerns, discuss capacity constraints, and refine technical requirements and share insights and lessons learned/best practices. Incorporating market feedback and setting flexible timelines can increase supplier interest and encourage competitive bidding, more comprehensive proposals and innovative solutions.
Find out more about early market engagement, here: If you build it, they will… | Gardiner & Theobald Market Intelligence
Clear objectives, effectively communicated across the supply chain, are essential to fostering collaboration and benefits realisation. One of the most powerful tools we've seen in driving this collaboration is the use of balanced scorecards. G&T has helped clients create these scorecards for projects like His Majesty’s Naval Base Portsmouth and the NHS New Hospitals Programme.
Find out more about benefits realisation here: Beyond the Bottom Line: How Benefits-Led Programmes create value for society
Collaboration is Key
As the energy sector becomes increasingly interconnected, collaboration between governments, industry stakeholders and investors is essential. Establishing forums where ideas, best practices and lesssons learned can be exchanged foster a more efficient and innovative market environment. Forming strong partnerships with the supply chain can significantly shorten tendering timelines and boost market interest. For instance, The Great Grid Upgrade – where National Grid partners with seven supply chain firms – will play a key role in supporting the upgrade and expansion of the UK’s electricity infrastructure.
Investing in Skills and Technology
To meet workforce demands, targeted training programmes and apprenticeships should be prioritised, along with initiatives to attract talent from other industries. On the technology front, recent innovations—such as Voltage Source Converter (VSC) technology and 525kV XLPE cables—are reshaping the sector. Offshore Hybrid Asset interconnectors are also emerging, allowing multiple countries or power sources to connect to a single onshore point.
Standardisation and Knowledge Sharing
Standardising certain parts of the procurement and design processes can streamline project delivery and reduce costs. Centralised digital platforms for tracking supply chain capabilities, financial health, and innovation can significantly shorten procurement timelines. Secure information-sharing mechanisms between projects improve market transparency, reduce procurement timelines and facilitate better decision-making.
How G&T Can Support Clients
G&T has played a key role in HVDC interconnector projects, providing procurement and commercial advice to ensure projects demonstrate value for money. We conduct detailed cost benchmarking, including the modelling of commodity pricing uncertainty and providing a robust project risk analysis and quantification to support regulatory submissions.
Our expertise highlights the importance of early risk assessments in identifying challenges related to design, supply chain constraints and regulatory compliance. We advocate for strong procurement processes, clear award criteria and risk-sharing mechanisms to enhance project delivery.
Conclusion
The global interconnector market is at a critical juncture, where overcoming supply chain, resource and technological challenges will be pivotal in ensuring the continued progress of the energy transition. At G&T, we support clients across the entire project lifecycle, ensuring successful outcomes in this fast-evolving sector.
Get in touch to learn how we can assist with your interconnector projects.
References
- High Voltage Cable Market Size, Growth, Analysis - 2032
- Initial Project Assessment of the Window 3 Interconnectors - decision | Ofgem
- [For Website] Security and efficiency: The case for connecting Europe and North America
- HVDC Transmission System Market Growth, Trends & Forecast
- LME quarterly report - 2024 Q3 | London Metal Exchange
