February 5, 2014 / 3:36 PM / 4 years ago

Power market coupling boosts chance of UK-Norway cable -Statnett

OSLO, Feb 5 (Reuters) - The prospects of building the longest subsea electricity cable in the world across the North Sea have improved after Britain joined the European move to a single power market, Norway’s grid operator Statnett said on Wednesday.

Europe on Tuesday unified electricity trading across 15 countries, including Britain and Norway, through a process called market coupling, to ensure that electricity flows from cheaper to more expensive areas.

“Having market coupling, having a liquid spot market in both the Nordics and the UK, is very important for the trade and gives incentives to build the longest subsea cable in the world,” Bente Hagem, Statnett’s vice-president, told Reuters in an interview.

Statnett and the UK’s National Grid have been working on a 1.5 billion to 2 billion euro project to build a more than 700 km subsea cable across the North Sea with a capacity of 1,400 megawatts.

Hagem said plans by the two companies had already included expected gains from Britain’s participation in the market coupling with the North Western Europe (NWE) region.

“If we had failed (to implement market coupling) ..., we would have lost about 10 percent of the income” from sales of power via the cable, said Hagem, who has co-chaired the market coupling project.

“That’s about 200 million Norwegian crowns ($31.8 million) per year for the two cable owners. That’s a lot of money,” she added.

This week power exchanges began calculating day-ahead power prices simultaneously and using the same method across 15 countries from France to Finland, an area covering 75 percent of European power consumption.

The new pricing method calculates power prices and cross-border capacities at the same time, ensuring that electricity flows from cheaper to more expensive areas.

When prices and transmission capacities are calculated separately, flows go the wrong direction about 10-20 percent of the time, because market participants are less able to predict prices.

The UK-Norway cable project still requires approval by the Norwegian government.

Norway’s oil and energy minister Tord Lien told Reuters on Tuesday he could support the cable, with the condition that it should be profitable for his country.

The Nordic country wants the interconnection, planned to come online in 2020, to be included in the UK’s planned capacity market. That means Norwegian power exporters, similar to British utilities, could be eligible to receive state payments for keeping capacity on standby for times when it is needed.

“To establish a capacity market without interconnectors, the business case is not very good,” Lien said.

Discussions with British authorities are ongoing, and both sides are willing to reach an agreement, Statnett’s Hagem said.

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