This year will be an important one for the future of UK interconnectors. Investment decisions are pending for both our new electricity links to Belgium and Norway – decisions that could have a big impact on energy security and prices.
Just how important that impact could be is the subject of new analysis we’ve commissioned, taking a wider look at what we stand to lose or gain if the UK can double its interconnector capacity by 2020.
At the moment, the UK has four interconnectors with 4GW capacity – the equivalent of about five large power stations. However, this is a relatively small amount compared with other countries. And it’s about half the level of interconnection that the European Commission envisages – it is talking about interconnectors making up 10 per cent of generating capacity.
The analysis shows that the UK could unlock £1 billion a year of cost benefits if we doubled our interconnector capacity by 2020. But failing to reach the 10 per cent proposed by the EU would be the equivalent of losing £3 million a day of cost benefits.
So how are these savings achieved? Quite simply, importing cheaper power from other countries reduces wholesale prices in the UK. The analysis estimates that each 1GW of new interconnector capacity could reduce UK wholesale prices by 1-2 per cent. So 4-5GW of new links to mainland Europe could provide up to £1 billion a year of wholesale price reductions.
More interconnectors would offer us more diversity of supply and another option for periods of peak demand.
And there would be green benefits, too. To be able to tap into low-carbon hydropower from Norway, wind power from Denmark and Ireland, and even geothermal power from Iceland would help us to meet environmental targets on renewable energy and carbon emissions.
More interconnectors would also allow us to play a bigger part in the European integrated energy market.
National Grid and other developers have worked hard to get interconnector projects to a stage where they are ready to move forward. There’s been strong support from the UK government and European institutions. In the next few months we expect Ofgem to unveil the new regulatory regime for interconnector links from the UK. Let’s hope this positive momentum continues and we will all be able to feel the multiple benefits that interconnectors can bring.
Peter Boreham, director of European business development, National Grid