An over-reliance on interconnectors to provide backup power for intermittent renewables could put the security of power supplies at risk, a new report from Aurora Energy Research has cautioned.
The market intelligence firm said Britain is becoming increasingly dependent on electricity imports from Europe with up to 17.9GW interconnectors forecast to be operational by the mid-2020s – the equivalent of 30 per cent of peak demand.
The focus of the study is not whether interconnectors should be built or not but rather how much they can be relied upon when supply margins are tight.
The report says interconnectors offer multiple potential benefits to the power grid: providing an additional layer of security; reducing emissions by facilitating the integration of wind and solar power into the energy system; and lowering costs for consumers if power can be generated cheaper abroad.
However, it also warns interconnectors can create extra uncertainty for policy-makers attempting to understand and manage the energy system.
Informed by advice from National Grid’s system operator, the secretary of state for business and energy determines how much generation capacity is needed to “keep the lights on” during winter peaks, and therefore how much should be procured in capacity market auctions. These decisions are based on a number of assumptions, including how much electricity different sources are likely to provide during system stress events.
The extent to which they can be relied upon is reflected in their capacity market de-rating factors – a measure of expected availability which is generally set in line with historical performance. Participants in the capacity market bid, and are paid, according to their de-rated capacity.
The report raises a number of concerns over the de-rating factors for interconnectors, firstly, that the historic performance of interconnectors is inadequate to justify the current ratings. It says individual interconnectors underperformed their de-rating factors between 30 per cent and 99 per cent of the time during winter peaks from 2015 to 2018.
It also points out that interconnectors can make a negative contribution to security of supply, exacerbating peak demand in Britain when power prices are higher elsewhere, as happened during the winter of 2016 when nuclear outages drove exports to France. It says these phenomena are not properly accounted for in the current de-rating methodology.
Lastly, it warns that because genuine system stress are rare – occurring perhaps less than once per decade – it is difficult to accurately forecast the future reliability of interconnectors. Historical data is limited, giving plenty of reason to err on the side of caution, especially bearing in mind the speed at which both technology and policy is evolving in Europe.
The report highlights changing technology and policy as the first two in a series of risks which are faced when setting de-rating factors for interconnectors. Increased deployment of renewable generation exacerbates the impact of correlated periods of low-wind across Europe, whilst policy developments have the potential to fundamentally alter the underlying economics on which current de-rating factors are based.
There are also saturation and compound risks. As the amount of interconnection rises, each additional interconnector contributes progressively less to security of supply and therefore needs to be given a lower de-rating factor. Uncertainty over interconnector performance is further compounded by the potential that other technologies will fail to deliver as expected, for example, demand-side response, for which there is limited data to justify the de-rating factors of unproven projects.
Aurora said its analysis of historical data and forward-looking modelling suggests the government should reduce its reliance of interconnectors by lowering their de-rating factors.
Chief executive John Feddersen, said: “Many new interconnectors will be built in the next five to ten years, vastly expanding our ability to trade electricity with our neighbours. These should enable a more flexible, lower-carbon electricity system.
“However, the contribution of interconnectors to security of supply is unknown, and, to a significant extent, unknowable. Government has so far overlooked this inconvenient fact.”
He continued: “Reducing the reliance placed on interconnectors for security of supply would enable Great Britain to retain the benefits of freer flow of electricity with Europe, while ensuring sufficient domestic back-up capacity exists in the event that interconnectors prove to be less reliable than government currently assumes”.
The report was sponsored by RWE, Centrica, Scottish Power, SSE, Uniper, Drax, Calon Energy, Green Frog Power and the Flexible Generation Group.
Its findings were welcomed by Tom Glover, chief commercial officer for RWE Supply and Trading, who said interconnectors cannot be relied upon in the way as domestic generation as owners do not have control over dispatch and “power will simply flow to where the price is highest”.
He also noted that imported power is exempt from paying the carbon price support: “GB plants are being pushed ‘out of the money’ by interconnectors, and ultimately, emissions and value is simply being sent abroad.”
Britain currently has 4GW of interconnector capacity and another 3GW of projects won new build contracts in the latest T-4 capacity market auction. If all of the currently planned interconnectors are built according to the dates suggested by Ofgem, total capacity will hit 17.9GW by the mid-2020s.