Reforms to interconnectors within national wholesale market will add value to UK energy system, says industry report

A report released today (December 12) by Scottish Renewables sets out an alternative approach to locational wholesale pricing capturing the benefits interconnectors can provide to the UK’s energy system. The report also sets out significant opportunities to increase the benefits provided by interconnectors within a national wholesale market.

The report ‘Getting Interconnectors Right for Net-Zero: Reforms to improve interconnector planning and operation within a national wholesale market’ has highlighted the need to place interconnectors at the heart of emerging strategic planning.

The UK must also work collaboratively with partners in connected countries to build on the benefits interconnectors already provide to the UK’s electricity system

Electricity interconnectors are high-voltage land and subsea cables that connect the electricity systems of neighbouring countries. They enable surplus clean energy to be traded and shared between countries and help manage surges in demand.

The UK Government’s Review of Electricity Market Arrangements (REMA), a process to identify the reforms needed to transition to a decarbonised, cost effective and secure electricity system, has highlighted the importance of having effective frameworks to influence how interconnectors operate. This will ensure interconnectors can better support the needs of the UK’s future electricity network.

However, to date, REMA has been narrowly focused on locational wholesale pricing as a way to improve interconnector operation. In doing so it has failed to explore the opportunities for reform within a national pricing framework.

The Energy Landscape report, commissioned by Scottish Renewables, sets out an alternative approach, arguing that the debate on REMA needs to be broadened to consider the benefits as well as the challenges created by interconnectors.

It also highlights the collaborative nature of interconnectors and the need to therefore ensure that interconnectors are planned, built and operated in close partnership with international stakeholders, ensuring mutual benefits for the UK and connected countries.

The report’s five recommendations for the UK to improve the planning and operation of interconnectors are:

• Produce a strategic plan for interconnectors to ensure their deployment aligns with the wider development of the GB energy system.
• Use methods developed in Europe to improve the operation of interconnectors by coordinating with system operators in connected countries.
• Ensure the UK’s trading arrangements evolve to align with European market developments
• Collaborate with connected countries to develop market reforms
• Prioritise reintegration into the European Internal Energy Market.

Andrew MacNish Porter, Head of Economics and Markets at Scottish Renewables, said:

“Interconnectors have been central to the debate over the Review of Electricity Market Arrangements.

“However, to date, comparatively little effort has been made to explore how interconnector operation can be improved whilst retaining a national wholesale market. Interconnectors are valuable electricity system assets which already provide significant benefits to Great Britain.

“This report identifies several ways in which the value of interconnectors can be maximised within a national pricing framework, including by working together with partners in connected markets and ensuring that the deployment of interconnectors in the UK is central to the strategic plans which will shape our future energy system.”

Dr Simon Gill, Consultant at The Energy Landscape, said:

“Interconnectors already deliver significant value in Britain, and they will be important if we are to achieve our objectives of clean power in 2030 and net-zero.

"They ensure that renewable energy generated in Scotland has access to markets across Europe and supports decarbonisation beyond our borders. Interconnectors also add to the security and resilience of Britain’s own energy supply.

“As we consider how to reform our electricity market we need to recognise the value that interconnectors already add and make sure these assets can be used effectively. Key to this will be working in partnership with neighbouring markets including those we are already connected to – France, Belgium, the Netherlands, Denmark, Norway and Ireland – and those we will connect to in future.”  

Ends

Notes to editors

• Read the report ‘Getting Interconnectors Right for Net-Zero: Reforms to improve interconnector planning and operation within a national wholesale market’
• Free to use images of Andrew MacNish Porter available, here.