ESB National Grid has announced plans to build a second electricity interconnector with Northern Ireland Electricity at a cost of around €180 million.

The new interconnector will more than double the existing capability for trading power across the Border.

The existing interconnector between Tandragee in the North and Louth has a capacity of 300mw, enough to power around 300,000 homes.

It is expected the operational capacity of the new link will be around 400mw.

In a joint statement, ESB National Grid and Northern Ireland Electricity said the development was likely to become operational by 2012. The two bodies said they had begun the process of obtaining planning permission for the project.

"In order to provide the best technical solution, the proposed new interconnector will be constructed west of the existing North-South interconnector," the groups said in a statement. "This route corridor will have the additional benefit of enhancing the security of electricity supply in western regions."

They said the interconnector would integrate into existing electricity networks and strengthen security of supply as well as supporting the future growth of renewable generation.

The project has the backing of ministers of both sides of the Border and of both regulators.

The second link was first mooted by then energy minister Dermot Ahern and his Northern Ireland Office opposite number Barry Gardner in the middle of 2004.

The news that the project was going ahead was welcomed last night by renewable energy group Airtricity.

"Today's announcement is a demonstrable indication of the two governments' contribution to increasing choice and competition in the wholesale electricity market across the island of Ireland," said Airtricity chief executive Eddie O'Connor.

The ESB National Grid is expected to be separated from the ESB later this summer, with the new entity being called EirGrid.