27 February 2017

Interconnectors – high voltage cables linking Great Britain’s energy system with our partners in Europe – are set to become a critical part of the UK’s future energy system, providing much needed flexibility that will help to enhance energy security, reduce consumer electricity prices and enable the further growth of low carbon generation.

Regen will shortly be meeting Nick Hurd, Climate Change Minister, and making the case that we need to be very careful that Brexit doesn’t result, whether through design or accident, in the isolation of the GB energy market from the wider European market. More generally Regen believes that the any future low carbon energy system must be based on a greater degree of cross-border and inter-regional integration and connectivity, supported by smart flexibility, not a move towards standalone energy markets.

Great Britain currently has 4 GW of interconnector capacity linking the GB energy system to continental Europe, via France and the Netherlands, and to the island of Ireland energy system. There are however plans in place for 10 or more new high voltage direct current (HVDC) interconnectors which will add an additional 10 GW of capacity and provide new links to north west France, Denmark, Belgium, Ireland, Norway and potentially Iceland.


Interconnector Projects

Last week the energy minister Jesse Norman announced that work has now started on the first of these new projects, the 1 GW ElecLink HVDC connection which will run through the Channel Tunnel between Sellindge in the UK and Les Mandarins in France.

“As a government we are strongly supportive of greater electricity trading with our European partners in order to lower household bills and deliver energy security as part of our modern industrial strategy.”

UK Energy Minister Jesse Norman

Also in the news last week was the announcement that EU funding worth 10 million euros will be made available to jump start the £1.3 billion, 1.4 GW, NorthConnect project linking Norway and Scotland which received approval from OFGEM last year.

So as new projects move forward it is worth considering the wider benefits that greater levels of integration will bring to the both UK and European energy systems.

In broad terms the key benefits of interconnection include:

1. Providing greater energy security. Enabling the UK and Ireland to import electricity at times of peak demand or generation shortage, and to greatly widen the available mix of low carbon energy sources to include, for example, offshore and onshore wind power from north west Europe, nuclear energy from France, hydro power from Norway and even solar energy from southern Europe and North Africa. Whilst reducing the relative amount of back-up and standby capacity that is required to maintain acceptable capacity margins within the UK energy system.

Just in case anyone is concerned about reliance on foreign electricity it is worth noting that the UK now imports over 43% of the fossil fuels it consumes, and so it is probably better from a security standpoint to trade electricity with our near neighbours that rely on gas shipped through the Straits of Hurmuz.

2. Reducing consumer bills by increasing the level of cross border competition and allowing consumers and industry to take advantage during times of lower European electricity prices. Wholesale prices are typically, but not always, less than in the UK and Ireland due to higher levels of market integration.

3. Reducing price volatility and uncertainty. Reducing daily and seasonal price variability and dampening the effect of supply/demand imbalances which are likely to cause price spikes such as those that have been seen during recent stress events.

4. Creating a market for surplus generation. Allowing the export to new markets of excess wind, solar and other variable forms of low carbon generation such as hydro, tidal and wave energy when supply exceeds demand within the domestic market.

From a decarbonisation perspective, interconnection (alongside other measures such as energy storage and demand side response) will be essential to enable higher levels of renewable energy deployment. This argument applies at both a national level and when considering inter-regional and local energy markets.

Not only do interconnectors form part of the armoury to address the vexed question of what happens when the wind doesn’t blow, critically they will allow renewable generators to export wind and solar energy during times of peak generation when otherwise valuable energy resource might be wasted. So whether it’s wave energy from Cornwall, tidal energy from the Bristol Channel or wind energy from Scotland we can utilise every kWh produced. The ability to export will greatly improve the business case for new generation, and lessen the future burden on consumer subsidies; it will also enable clean energy produced in the UK to help displace coal and other high carbon generation across northern Europe.

Perhaps because of these benefits, and the competitive threat they pose, the strategy to increase the level of interconnection has received some criticism of late, stemming mainly from the fossil fuel industry.

In an article in Utility Week, Felix Lerch, the chairperson of Uniper UK, whose parent company’s business is mainly in coal and gas generation, argued that “Interconnectors are an important part of the energy mix, Tick. But they are not competing on even terms with generators. That should be addressed.”

Lerch is correct to point out that the issue of cost allocation and the establishment of a level playing field for all sources of energy supply does need to be addressed. The UK government and Ofgem should be wary however of listening too much to vested interests; particularly those who have an incentive to maintain the status quo, at the long term expense of householders and industrial consumers, or delay investment in a low cost, flexible and cleaner energy future.

One thing all parts of the energy industry can agree on is that, to make the future energy system work, it is essential that the UK continues to be part of the European Internal Energy Market (IEM).  We are already seeing the impact of the UK’s puzzling decision (or was it a mistake?) to leave the European Atomic Energy Community (Euratom).

If we are not very careful Brexit could result, whether through design or accident, in the isolation of the GB energy market from the wider European market. This unintended autarky would be to the extreme detriment of UK energy consumers and seriously derail any aspirations the UK had to decarbonise its energy supply.

Let’s hope that outcome doesn’t happen and we can look forward to a much cheaper and cleaner energy future trading low carbon energy with our European partners.

Author: Johnny Gowdy

Contact: jgowdy@regensw.co.uk

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