Trading to start on UK-Norway power cable as both markets face constraints

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Workers lay a NordLink subsea interconnector power cable to connect Norway and Germany at the Vollesfjord fjord near Flekkefjord, Norway May 31, 2018. REUTERS/Lefteris Karagiannopoulos//File Photo

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OSLO, Sept 30 (Reuters) - Nordic power exchange Nord Pool will hold its first auction on Thursday to trade electricity on a newly launched interconnector between Norway and Britain as both markets grapple with tight energy supplies.

On the Norwegian side, more than 10 market participants have signed up to trade power on the North Sea Link (NSL), Nord Pool told Reuters. The cable will operate at half its 1,400 MW design capacity for a three-month trial period that begins on Friday.

Linking Norway's southern NO2 price zone with the British power market, the cable has detractors in Norway, where some members of parliament have said it will lead to exports of electricity that could best be used at home.

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Spot power settled at a record high monthly average of 86.01 euros per megawatt hour in the Nordic market in September, and 106.33 euro per megawatt hour in NO2 , Nord Pool data showed.

But supporters of the project say both nations will benefit, as Britain gets access to Norway's hydropower resources to help balance intermittent wind power, while Norway will be able to import power during times of high wind to save water in reservoirs.

The NSL startup at a time of strained energy systems in both markets will test those arguments. [nL1N2QH0KC) read more

Dry weather in Norway this year and high demand last winter have reduced levels in some reservoirs to 20-year lows. Transmission system operator Statnett on Monday downgraded the NO2 zone's status by one notch from "normal" to "tight".

The warning does not impact Norway's power exports, NO2-based power producer Lyse told Reuters this week.

Respite may also be in sight for Norway, Anders Gaudestad, head of power management at Agder Energi (AGDER.UL) based in NO2 told Reuters.

"Forecasts are for a lot of rain this week, so we hope and believe the situation will improve somewhat if the wet weather hits," he said.

NSL capacity will be allocated at 1050 CET (0850 GMT) for deliveries the following day through Nord Pool's existing UK day-ahead power auction, and a counterpart auction in Norway's NO2 bidding area.

On Friday, power will flow from Norway to the UK for all hours from 0800 CET (0600 GMT) with hourly prices in the UK reaching as high as 255.55 pounds per megawatt hour compared with 106.25 euros (91.65 pounds) per megawatt hour in NO2, Nord Pool data showed.

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Reporting by Nora Buli; editing by Barbara Lewis and Bernadette Baum

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