The plan is part of the North West European (NWE) market coupling project. The virtual hub will help pool GB trades and as a result help to form a common reference price for electricity across all participating GB power exchanges by the end of 2012 .
Nord Pool Spot was selected following a tender run by National Grid Interconnectors.
In contrast to the other countries involved in the NWE market coupling project, the GB market allows for multiple power exchanges and interconnector operators to participate in the market. The new hub will facilitate access to the exchanges and ensure that there is a single electricity market price for GB, rather than potentially having differing prices on each GB exchange.
The hub will allow demand to be matched with the cheapest generation in the NEW region, subject to there being sufficient available interconnector capacity. GB traders will continue to have their usual contractual relationship with their power exchange, Nord Pool Spot’s role as hub operator will be to facilitate the inter-exchange transactions and arrange for interconnector flows with the interconnector operators.
Welcoming the new agreement Mikael Lundin, chief executive of Nord Pool Spot, said: “Our experience in market coupling has seen us already successfully integrating the Nordic countries and Estonia, working with the Polish Power Exchange to establish price coupling between the Nordic markets and Poland, as well as developing the N2EX market, operated jointly with Nasdaq OMX Commodities, here in the UK.”
Alison Kay, Director of National Grid Interconnectors Ltd, commented: “We are delighted to have chosen Nord Pool Spot as our partner to develop and operate the GB virtual hub.
“The appointment of the hub operator and the development of the hub arrangements during 2012 are important steps towards the goal of a single European market by 2014.
“We believe that the ‘virtual hub’ will lead to more efficient allocation of interconnector capacity and through its role in pooling liquidity promote a more robust GB electricity reference price for market coupling.”
The announcement came just a month after plans to extend interconnection between Great Britain and other parts of the EU took a step forward with the demolition of old cooling towers at Richborough in Kent to make way for a new interconnector with Belgium.
The 1000MW HVDC interconnector is a joint project between National Grid and Elia, the Belgian transmission system operator. It would be the third electricity interconnector connection between Kent and Europe. The BritNed interconnector between UK and the Netherlands went into operation in 2011 and the IFA interconnector to France began in 1986.
Further reading
Scotland-Norway interconnector application submitted to National Grid