Overseas Electricity Interconnection

12 Feb 2018 12:59 PM

Electricity markets in the UK, Ireland and continental Europe are physically linked by ‘interconnector’ cables. These benefit energy system operators and consumers by reducing prices. They can also help integrate renewable electricity and ensure security of supply. This note discusses these benefits, proposals for future increases in interconnection and the potential effects of Brexit.

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Electricity is imported into and exported from the Great Britain (GB) market via undersea cables connecting transmission networks in GB to the rest of Europe. GB currently imports more than it exports. Net imports in 2016 were equivalent to 6% of and this is expected to increase in future as a number of interconnector projects are under development. Government and industry experts agree that increasing levels of interconnection across the UK can benefit consumers, markets and systems in the UK and EU.

As the UK is a member of the EU Internal Energy Market (IEM), interconnectors are currently regulated in accordance with EU law. It is possible that the UK could leave the IEM as part of the EU withdrawal process. Doing so could make electricity trading less efficient, increasing operator and consumer costs.

Key points in this POSTnote include:

• The UK currently imports around 6% of its electricity from northwest Europe. Imports are expected to increase significantly. Interconnector capacity will double by the early 2020s, and may double again by 2030.
• Access to cheaper electricity from abroad has reduced the price of UK electricity to date. Interconnection causes prices in connected markets to converge.
• Interconnectors reduce the need to curtail intermittent generation, reducing the cost of renewables to the electricity system.
• Imports can improve energy security by providing access to a wider market.
• EU regulations and bodies currently govern trade across interconnectors. If the UK leaves the Internal Energy Market, trade may become less efficient and more costly.

Acknowledgements

POSTnotes are based on literature reviews and interviews with a range of stakeholders and are externally peer reviewed. POST would like to thank interviewees and peer reviewers for kindly giving up their time during the preparation of this briefing, including:

• Prof David Newbery, University of Cambridge*
• Antony Froggatt, Chatham House*
• Ryan McLaughlin, Ofgem*
• Stuart Borland, Ofgem*
• Pavlos Trichakis, Baringa Partners*
• Charles Whiddington, Fieldfisher
• Mauzima Bhamji, De Broglie Ltd.*
• Prof Michael Grubb, UCL
• Dr Giorgio Castagneto Gissey, UCL*
• Clara Semal, National Grid
• Tom Ireland, National Grid*
• Mark Duffield, National Grid*
• Eleanor Brogden, National Grid*
• Jan Hoogstraaten, BritNed*
• Yvonne Visser, BritNed
• Matt Coyne, BEIS
• Joe Nicholls, BEIS*
• Filippo Gaddo, ARUP
• Paul Trimmer, Old Apple Consulting
• Scottish and Southern Electricity (SSE)
• Prof Michael Pollitt, University of Cambridge*
• POST Board Members*

* denotes people who acted as external reviewers of the briefing.