The watchdog said the project, by SSE’s Scottish Hydro Electricity Transmission arm, is expected to connect 1.2 gigawatts of renewable power to the electricity network when it is completed in 2018.
Martin Crouch, senior partner for transmission, 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.”
Ofgem said that, if it finds that the project could be delivered for less, it will lower the amount of funding allowed to complete it. The regulator will consult on the detailed funding proposals in the autumn.