The value of Interconnection in a Changing EU Electricity system

Lead Research Organisation: University College London
Department Name: Bartlett Sch of Env, Energy & Resources

Abstract

Investing in new European interconnection capacity is one strategy to integrate renewables and nuclear power stations in the electricity systems of GB and Ireland, by maximising their value through exports and meeting demand peaks through imports.

This project aims to assess the value of UK interconnectors to the EU-27 and Norway, examining both the GB and the Irish Single Electricity markets, by investigating five hypotheses:

1. Expanding GB-linked interconnectors would reduce the cost of electricity for both the UK and the EU-27.
2. The operational value of interconnectors will be affected by post-Brexit market relationships (e.g. the GB relationship with the European Energy Union and the Irish Single Electricity market).
3. Balancing markets could be an important future source of revenue for interconnectors.
4. Previous interconnection modelling studies have misinterpreted spurious correlations caused by continent-wide increases in renewables and other system evolutions.
5. The optimal level of investment in GB and I-SEM interconnectors, and between Northern Ireland and the Republic of Ireland, in terms of both security and cost, will be affected by the outcome of Brexit negotiations.

The ETM-UCL European energy system model and the ANTARES European electricity dispatch model are being used to assess the potential benefits of existing and new interconnection between the UK and the EU-27 and Norway, for a range of post-Brexit policy environments. The impact of interconnectors and renewables on electricity system stability is being assessed.

The GCDCN model, adapted from neuroscience, is being developed to identify causal relationships between interconnection investments and price variations across UK and EU-27 markets. This provides a foundation for improving regulatory models and investment business case analyses.

Planned Impact

Renewable and nuclear electricity generation is expected to have an important role in reducing UK greenhouse gas emissions to achieve the 80% reduction by 2050 enacted by Parliament. The Lords Science and Technology Committee 2014-15 Session highlighted evidence that increased interconnection could bring significant benefits to the UK electricity system, by enhancing resilience and decreasing the costs of electricity in the wholesale market. The UK Parliament and the UK Government are interested in more detailed analysis of the potential value of interconnection.

The UK has large potential renewable resources and interconnectors could facilitate a thriving electricity export industry in the future, underpinning green jobs in renewables and potentially increasing UK energy independence. The Scottish and Welsh Governments will benefit by understanding whether interconnectors can underpin greater investments in renewable generation in their jurisdictions, where renewable resources are particularly large.

The UK Government has specifically identified the "potential contributions to system balancing [by interconnectors]" as an area in which they need further scientific evidence. This project will provide evidence about adequate levels of interconnections for the GB and Irish systems in the longer term, how these would be affected by political decisions and the transition to low-carbon electricity systems in different countries, and what the implications would be for security of supply. The system operator, National Grid, will benefit from understanding the implications of interconnectors for system stability and are keen to better understand the uncertainty that they identify about future interconnectors in their letter of support.

The Government faces challenging Brexit negotiations with the EU-27 about the future relationship between the GB, Irish and continental electricity markets. Parliament has asked BEIS to open an inquiry on negotiation priorities and has recommended that these include interconnections. Little evidence is available to inform investment decisions in the long term. This proposal will provide evidence on the implications of different options for both the UK and EU-27, including the potential for UK electricity exports to EU-27 markets in the medium to long term under different political and market environments.

Interconnectors are an important area for electricity regulators, with Ofgem having a statutory role in regulation and UREG co-regulating the Ireland Single Electricity Market. Both organisations have joined the Advisory Board of this project because of the potential for it to produce important insights to underpin their work.

The analysis of interconnection business cases will be more comprehensive than was previously possible due to the use of the innovative GCDCN model, to enable better investment decisions that reduce the future cost of low-carbon electricity to consumers. This will benefit large industrial owners and operators of interconnectors such as National Grid Ventures, Scottish Power and Transmission Investment, who are all project partners. The research on public and private benefits will provide the appropriate information to the UK Government so it can ensure that consumers do not lose out from interconnector investments.

Publications

10 25 50
 
Description The GB electricity system is connected to France, Netherlands and Ireland. The markets are all coupled, which means final prices are calculated in each market at the same time using the same system, to maximise the efficiency of the flows and minimise market costs. Prior to 2018 (Ireland) and 2014 (France), markets were not coupled. The impact of market coupling on interconnector operations has been assessed through careful data processing and analysis of trading data, covering several interconnectors in multiple years. This analysis has been complemented by a detailed review of how interconnector trading functions in coupled and uncoupled markets, by a former trader. This has enabled us to put a value on the existing GB interconnectors, and also to develop a route to model the implications of market uncoupling in the future when there could be substantially greater interconnection capacity, which is a key goal of this project.

System non-synchronous penetration (SNSP) has been investigated for the GB network by feeding system stability limits on renewable/interconnector electricity into the ANTARES European electricity dispatch model. This has shown that following the construction of new interconnectors, renewables would have to be constrained for much of the year in the GB network under existing Rate of Change of Frequency (RoCoF) regulations. A planned relaxation of those regulations from 0.125 Hz/s to 0.5 Hz/s in 2020 will help, but renewable constraints will still be required, and these could substantially increase the marginal price of electricity above existing long-term forecasts.
Exploitation Route This will be discussed at a forthcoming Project Advisory Board meeting.
Sectors Energy

 
Description System non-synchronous penetration (SNSP) has been investigated for the GB network by feeding system stability limits on renewable/interconnector electricity into the ANTARES European electricity dispatch model. This has shown that following the construction of new interconnectors, renewables would have to be constrained for much of the year in the GB network under existing Rate of Change of Frequency (RoCoF) regulations. A planned relaxation of those regulations from 0.125 Hz/s to 0.5 Hz/s in 2020 will help, but renewable constraints will still be required, and these could substantially increase the marginal price. National Grid and Ofgem believe that our RoCoF analysis, once complete, would be a valuable method to inform and justify National Grid operation changes and Ofgem rule changes in future. Please note that this is research in progress and subject to change as the project continues.
First Year Of Impact 2018
Sector Energy
Impact Types Economic,Policy & public services