France and Spain announced a breakthrough on Thursday in a long-running impasse over what would be their first undersea electricity link.
Spanish competition watchdog CNMC and French energy regulator CRE gave the go-ahead to a new cost-sharing deal between the two countries for a project first broached in 2017 after a sharp increase in its estimated cost.
The 400-km-long (250-mile-long) cable spanning from Spain's northern coast to France's western coast through the Bay of Biscay is now estimated at a total cost of around 2.85 billion euros ($3.01 billion), above the initial estimate of 1.75 billion euros, CNMC said.
The European Union will contribute at least 578 million euros towards the cost, it said.
After discounting EU aid, the distribution of costs will be 54% for Spain and 46% for France. The burden for Spain is slightly lower than what was agreed in 2017, according to a source at the Spanish regulator.
Reuters reported earlier on Thursday that the two countries were close to an agreement over the distribution of costs for the project.
Spanish power grid operator REE blamed the increase in costs on the "saturation of markets for the production of materials" and a shortage of companies with the technical capacity to build the cable.
It did, however, see opportunities for greater profits.
"The expected profits of the project have also increased considerably, due to the expected evolution of the energy mix and electricity consumption in European countries, in a context of accelerating energy transition," the CNMC said in a statement.
The project will boost the interconnection capacity between the two countries from 2.8 gigawatt to 5 GW and is expected to go online in 2028, CRE said.
The project would allow Spain to feed its bountiful renewable energy into a wider European grid, which makes it increasingly important after Russia's invasion of Ukraine unleashed an energy crisis in Europe last year.
($1 = 0.9456 euros)
(Reuters - Reporting by Belen Carreño, Benjamin Mallet and Kate Abnett; Writing by Charlie Devereux; Editing by Andrei Khalip and Leslie Adler)
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