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How will the North Sea Link interconnector impact the UK energy market?

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North Sea Link Cable

The North Sea Link interconnector with Norway saw its first official use in June 2021, and while it’s not due to commence full operation until October 1, how will the new interconnector impact the UK energy market? 

Many are hoping that the 1.4 GW North Sea Link with Norway will provide relatively cheap, low carbon electricity to the UK. That’s likely to be the case for Brit consumers, according to Cornwall Insight. 

Research shows that the North Sea Link will have an annual transmission capacity of 12.3TWh, and we can expect to see net imports as high as 10TWh per year to Great Britain. Based upon total electricity demand from 2019-20 (~290TWh), this would mean that the North Sea Link could provide an equivalent of 4.2% of the GB’s annual electricity demand.

This electricity flowing into Great Britain will mostly be produced by hydroelectric power stations in Norway, which is cheap, clean energy for the UK. The Norwegian power market is currently split into five Bidding Zones, each with its own wholesale power price. The North Sea Link will connect to Kvilldal in Bidding Zone 2 and will more broadly be connecting into one of the lowest priced power markets in Europe.

This is due to the higher power prices with the GB market regularly outturning at a premium against Norway, as highlighted below. We can see the extent of this price differential in Figure 1, with the monthly average power price in the GB between £14.7/MWh and £39.9/MWh higher than its Norwegian counterpart throughout last year.

https://i0.wp.com/storage.pardot.com/707633/16292083607UYt5W3n/interconnector.PNG?w=1410&ssl=1

Joe Camish, an analyst at Cornwall Insight, commented, “From an operational perspective, the rollout of the new interconnector will mean GB will be able to benefit from Norway’s cheaper energy to help balance its growing capacity of intermittent renewables. Norway could also expect to import from GB during high renewable, low demand periods to preserve its hydro capacity for peak demand periods.

“Back in December 2014, Ofgem produced an initial project assessment of the interconnector. The evaluation suggested that the NSL would benefit consumers by “reducing the wholesale price of electricity, improving the operation of the GB transmission system, and increasing the security of supply”. Throughout the 25-year cap and floor regime, Ofgem’s Base Case scenario forecast benefits to GB consumers of ~£3.5bn. The report also noted that in the same scenario, the average annual domestic consumer bill would decline by around £2.0 due to the NSL.

“However, this likely will not be the case for consumers in Norway, with studies anticipating increased Norwegian demand due to the higher exports associated with the NSL, which will raise Norwegian power prices by between 20-25kr/MWh, equivalent to £1.7-2.1/MWh.

“Lastly, its deployment is also expected to aid in meeting the GB’s net zero targets. With Ofgem noting back in 2014 that the NSL could assist the reductions in long-term GB carbon emissions due to more efficient renewables dispatch – i.e., making better use of GB wind and Norwegian hydro resources. National Grid, a partner in the project with Statnett, agrees with this view.

“The development of the NSL is just one of many similar projects over the coming years, as GB bolsters its interconnector capacity. As a result, the GB market can expect to see an additional 1.4GW of new interconnection next year.”

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2 Comments

  • by Colin Wales
    Posted August 30, 2021 10:57 am 0Likes

    The regulated asset based (RAB) model is a ruse by the nuclear industry to support Nuclear Power build costs. In any event just like Sizewell the project would consume millions of tonnes of concrete and steel, so the project will be front end carbon loaded. – Realistically, it will be years (if ever) before anyone can support the argument that there will be a CO2 saving here. – Current climate change predictions mean we simply don’t have the luxury of time anyway. – With renewable costs still falling we have an obligation not to increase fuel poverty.

  • by John Doe
    Posted May 6, 2022 5:52 pm 0Likes

    This cable has messed up the Norwegian energy market, and given people in the south of Norway a huge financial problem. Not able to pay the electricity bill. To show the impact, we can look at energy prices in Northern Norway and then in the south. The south pays up to 102 times !! more then the north. Due to very small grid capacity between north and south the price does not even out.
    People are properly pissed, and feel the politicians and Statsnett fu**** them over. People start to burn all kinds of stuff. Some even started to import coke and coal from the UK. People take wood pallets and burn them, some burn all the paper, cardboard and even plastic to keep warm, in order to save electricity. Most homes are heated by electricity. All the firewood was sold out. Now, the farmers chop down HUGE forests to sell as firewood. The next door neighbor got hold of several thousand VHS tapes that they burn in their wood oven. Somebody discovered books in used book stores were cheaper to buy then firewood. On TV a couple said they had burned several thousand books over the last few month. People buy cheap diesel heaters used for cars etc from China, and heat their home that way. Some people burn used clothing, used shoes etc. The environment does not benefit from this for sure. People talk online about how somebody should blow that powerline sky high.

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