The European Investment Bank (EIB) is lending €350 million (£298m) for the first power link between Germany and Norway.
Dubbed ‘NordLink’, the interconnector will have a capacity of 1,400MW and a route length of 624 kilometres.
It will be capable of providing renewable energy for more than 3.6 million German households.
The interconnector is expected to improve diversification and security of supply as well as enhance electricity market integration in both countries and more widely between NorthWest Europe and Scandivanian nations.
Ambroise Fayolle, EIB Vice President, responsible for Germany said: “Security of electricity supply and effective use of renewable energy will be improved significantly.
“Initially, NordLink will bring surplus hydro generation from Norway to Germany. In the medium term, it will help ease constraints and allow the evacuation of surplus renewable generation from Germany to Scandinavia.”