ESB and Viridian, who are currently fierce rivals in the energy sector, are considering coming together via their grid companies to build a new cross-Border electricity interconnector.

Sources have indicated that preliminary discussions have taken place between ESB National Grid and System Operator Northern Ireland (Soni), the grid company linked to Viridian about the idea. A cross-Border interconnector could cost anything up to €150 million. ESB National Grid is a separate entity from ESB Group, although its assets remain in the ownership of ESB. There is already a major interconnector between the two parts of the island. It crosses into the Republic near Tandragee in Co Louth.

It was first commissioned in 1970 but was the subject of persistent IRA attacks in the following years. It was only restored to full oepration in 1995. The Government is also exploring the idea of an interconnector to Wales,

The two companies have already agreed to co-operate on setting up a unified electricity system for the island, but it is understood the companies are now prepared to consider working together on a new inter-connector for the island which would open up both markets even further to competition.

Any new interconnector would be a significant infrastructural project. While upfront costs would be large, such an asset is likely to provide an attractive return over a long period. It is possible any such infrastructure would be regulated and given some kind of Government backing.

The Irish Government and the Northern Ireland Office have already held several discussions about the electricity market and the idea of new interconnector.

But it is not clear whether ESB National Grid and Viridian Soni would be given the contract to build and operate such an asset exclusively.

Other European grid and energy companies might want to tender for such a project, including the giant UK grid company Transco.

One person familiar with the project said: "The second interconnector makes a lot of long term sense: it protects security of supply across the island as demand increases, adds economies of scale to generation and provides the physical trading capacity to underpin the all island market and ads to competitive pressures as it makes easier for new players to enter the market".