The Department for Business, Energy and Industrial Strategy (BEIS) has issued a consultation on the recoupling of day-ahead power auctions in Great Britain.
Under EU regulations, the day-ahead auctions operated by EPEX and Nord Pool were previously coupled to produce a single clearing price for Great Britain to facilitate the implicit trading of interconnector capacity.
However, these arrangements were brought to an end by the UK’s departure from the European Union and its internal energy market, with now EPEX and Nord Pool operating fully separate markets clearing at different prices and interconnector capacity being bought and sold separately from power in explicit auctions.
As noted by BEIS, the decoupling of day-ahead auctions and return to explicit trading of interconnector capacity has resulted in trading inefficiencies as demonstrated by the emergence of conflicts between interconnector flows and price differentials across markets during some periods.
As part of its Trade and Cooperation Agreement with the EU, the UK has committed to reintroduce implicit trading of interconnector capacity based on the concept of “multi-region loose volume coupling”.
A cost benefit analysis published by the transmission system operators in the UK and EU in April 2021 found that the current lack of single clearing price for Great Britain may create issues for the implementation of this model, including incomplete optimisation and increased complexity.
BEIS has therefore proposed to recouple the day-ahead hourly auctions of EPEX and Nord Pool, which currently take place at 9:20am and 9:50am respectively. It said the timings of these auctions may need to be altered to enable the implementation of multi-region loose volume coupling (MRLVC).
The department said the recoupling of the day-ahead hourly auctions should take place on a standalone basis in advance of the implementation of MRLVC. It said this should happen as soon as possible and no later than April 2022.
As well as feedback on these proposals, BEIS also asked for views on whether similar arrangements should be introduced for other timeframes, in particular intraday trading in Great Britain, and for other cross-border trading with countries outside of the EU such as Norway.
The deadline for responses is 28 October 2021.
Ofgem recently approved a request by National Grid to implicitly allocate capacity for its new 1.4GW North Sea Link interconnector with Norway through day-ahead auctions on the Nord Pool power exchange.
The project was jointly developed by National Grid Ventures and the Norwegian transmission system Statnett and began commercial operation on Friday (1 October) following six years of construction. The 450-mile cable between Blyth in Northumberland and the Norwegian village of Kvilldal is the longest sub subsea interconnector in the world.
Energy, clean growth and climate change minister Greg Hands said: “The UK has a strong energy bond with Norway that goes back decades. North Sea Link is strengthening that bond and enabling both nations to benefit from the flexibility and energy security that interconnectors provide.”
Cordi O’Hara, president of National Grid Ventures, said: “North Sea Link is a truly remarkable feat of engineering. We had to go through mountains, fjords and across the North Sea to make this happen.
“But as we look forward to COP26, North Sea Link is also a great example of two countries working together to maximise their renewable energy resources for mutual benefit.”