Plans for a £1.2 billion undersea electricity cable that will help boost the country's renewable energy capacity have been given the go-ahead.
The project by SSE aims to deliver 1.2 gigawatts of renewable electricity generation through the link between Caithness and Moray in Scotland.
The scheme, which is due to be completed in 2018, represents the largest investment in the region's electricity network since the hydro era of the 1950s.
Ofgem said although it has approved the project, it is studying the financial details of the scheme. If it finds the project can be built for less, it will lower the amount of funding allowed to complete the link.
SSE unit Scottish Hydro Electricity Transmission is working on the scheme, which will connect planned wind farm projects in the area to the country's energy grid.
The regulator said it will consult on the project's funding proposals in the autumn.
Ofgem senior partner for transmission Martin Crouch said: "This is a major step forward for an essential upgrade to the high voltage grid so that more renewable energy can connect to the networks.
"We have already started on the next phase of checking SHE's spending plans and we will ensure it completes the work as efficiently as possible so that consumers pay a fair price for this."
The regulator also moved today to cut charges for green energy generators. Ofgem said that from April 1 2016 charges to these suppliers from the transmission operator, National Grid, will more closely reflect their use of the network.
The watchdog said this will benefit suppliers of wind or solar energy who do not constantly use the grid.
Transmission charges account for around 4% of the average household energy bill.
Mr Crouch said: "The changes to transmission charging are the result of an extensive consultation process and detailed analysis. The new arrangements more accurately reflect the costs of Britain's diverse energy generation and will lead to lower costs overall for consumers."
Work on the new subsea cable is expected to begin in the next few months, with more than 600 jobs being created, according to Scottish Hydro Electricity Transmission.
Mark Mathieson, managing director of networks at the energy company, said: "As a responsible developer, we have worked with communities and other stakeholders to make sure that we have the best solution for connecting renewable energy to the transmission system.
"I am very pleased that it has been given the green light and we will now work with Ofgem on the remaining details and focus on ensuring that the new link is constructed in a safe and responsible way so that the benefits it will bring in unlocking renewable sources of energy for decades to come are realised."
Michael Rieley, senior policy manager at the industry body Scottish Renewables, said the subsea link would "significantly reduce bottlenecks on the system, and could unleash over 1.2GW of renewable energy projects in the north of Scotland which is enough energy to power the equivalent of 637,575 homes".
Mr Rieley added changes to the transmission charging regime were "a long-awaited, and much welcomed, recognition of the value of the Scottish renewable energy sector".
He said: "The changes will help create a more level playing field between generators on the Scottish mainland and those further south, which is crucial if we are to make the transition to a low-carbon energy system while also providing value for consumers.
"Despite our disappointment that the new charging regime won't be implemented until 2016, four years later than originally estimated, this announcement from Ofgem is undoubtedly good news for the sector."
Lang Banks, director of environmental body WWF Scotland, said: "Given the urgent need to clean up the UK's power sector, cut climate emissions and keep the lights on, it's bizarre we've had a system in place that has effectively penalised some of the nation's best locations for generating renewable energy.
"While it's a pity that the scheme won't now start until 2016, we very much welcome the news that an agreement has been reached to improve the electricity charging regime. This decision should help to unlock much more of Scotland's massive renewable energy potential.
"Scotland already generates about a third of the UK's entire renewable electricity needs and has the potential to contribute more in the future now that this agreement is in place."