Until recently the UK’s electricity market was relatively isolated from the wider continental European market. This is now changing as interconnector capacity expands rapidly. This has significant benefits but also raises challenges.
Throughout the 1990s and 2000s the UK had only 2GW of electricity interconnection with continental Europe, about 3% of peak system demand[i]. (See chart – 0.5GW megawatts of interconnection to Northern Ireland was added in 2002). In 2011 the Britned interconnector with the Netherlands opened, providing and additional 1GW of capacity, with a further 0.5 GW to Ireland in 2012. This situation persisted until 2018. Interconnection to continental Europe (that is excluding Ireland) remained only 5% of peak Great Britain demand.
This has since changed rapidly. Total capacity has more than doubled to 8.4 GW today, with further capacity to France and Ireland, and links to Denmark and Norway added. This expansion looks set to continue with a number of further projects planned. I have marked these in dashed lines on the chart, with timings illustrative only. The UK’s National Grid expects total electricity interconnector capacity to reach between 16 and 22 gigawatts by 2030, with further expansion thereafter. Capacity will thus grown by a factor of four to five in just over a decade or so.
Chart: Development of Great Britain Electricity Interconnection
Source: Ofgem[ii]
This increased interconnection has a number of advantages.
- It helps balance a system that has increasing amounts of variable renewable generation. In particular it should help accommodate the large amount or offshore wind capacity expected on the GB system, where the government has set a target of 40GW of offshore wind by 2030. The interconnection with Norway, with its largely hydro based electricity system, seems likely to prove especially valuable in this respect.
- It allows demand to be met from the lowest cost source of supply.
Modelling of the UK Power system in 2035 shows a significant likely role for interconnection in balancing the system[iii].
However it also raises significant challenges.
- Market distortions may be introduced if carbon prices differ between jurisdictions, especially over the next decade or more before the GB system is fully decarbonised. Electricity may be produced where the carbon price is lower, even if emissions from that source are higher. It remains unclear how closely prices under the UK ETS and EU ETS will match over the next few years.
- Similar concerns arise over the role of incentives for new low carbon power, which will be essential but have the potential to create distortions.
- If some UK demand is met by imports it may be unclear if these come from low carbon sources. The UK and EU have the same target date of 2050 for net zero across the economy. However the UK also has a separate target for decarbonising the power sector by 2035, which the EU does not. The UK may thus meet its net zero targets in part by importing high carbon power from elsewhere in Europe in 2035. While this is consistent with many other goods, where embodied carbon does not count towards carbon targets, it nevertheless is a point of concern and something that policy should seek to avoid.
The growth of interconnect capacity is welcome. It should allow higher proportions of variable renewables to be accommodated on the system at lower cost. However there are several ways in where policy could distort markets and lead to unintended consequences. These need to be addressed if the growth of interconnector capacity is to maximise its benefits for the climate.
Adam Whitmore – 18th January 2022
[i] Based on 2005 peak demand of 62GW in 2010 and projected peak demand of 65-69 GW in 2030. Source National Grid Future Energy Scenarios 2021 https://www.nationalgrideso.com/future-energy/future-energy-scenarios/fes-2021/documents
[ii] https://www.ofgem.gov.uk/energy-policy-and-regulation/policy-and-regulatory-programmes/interconnectors
[iii] https://www.imperial.ac.uk/energy-futures-lab/reports/white-papers/net-zero-gb-electricity/
On Climate Change Policy 