Interconnectors to participate in the Capacity Market from 2015
Interconnectors linking Britain to our European
neighbours will be able to participate in the second four-year-ahead Capacity
Market auction in 2015, which will ensure a secure energy supply in the
winter of 2019/2020 from a diverse range of energy sources.
Improving our connection to Europe’s energy markets means our energy companies
can buy electricity from wherever it’s cheapest. It will give British
bill payers a better deal, strengthen our energy security and create more
opportunities for growth at home. It will also increase the potential for
low-carbon electricity to be used across the UK. And by ensuring as many
resources as possible can take part in the Capacity Market, competition
will be increased, driving down costs to bill payers.
Energy and Climate Change Secretary Ed Davey said:
“We’re working tirelessly to get the best possible deal for British bill
payers, and that includes linking us to other countries so that energy
companies can buy low-carbon electricity from wherever it’s cheapest.
“Including interconnectors in the Capacity Market from next year shows
the strongest signal yet to potential investors – building on the recent
announcement of funding for interconnectors that will create new links
to Norway, Belgium and France to almost double the power we can source
from overseas, particularly from low carbon energy sources such as hydro,
wind and nuclear.”
The Capacity Market will help keep the lights on by driving new investment
in electricity infrastructure, as well as getting the most out of our existing
power stations as we move to a low carbon electricity system. We are on
track to hold the first auction at the end of the year, which is expected
to be highly competitive following a successful prequalification process.
By including interconnectors in the Capacity Market, we’re providing the
clearest signal yet to developers and investors. There are currently several
interconnector projects in the pipeline representing about £5 billion of
private sector investment by 2020. By providing cheaper energy, interconnectors
could save consumers up to £9 billion out to 2040.
The European Commission recently announced €40 million funding towards
the longest subsea cable in the world, which will link the UK to Norwegian
hydropower, and two interconnectors to France. One will use the Channel
Tunnel, while the other has the potential to connect to future tidal generation
being developed off the coast of Alderney, one of the Channel Islands.
Together these three projects will almost double the power the UK is able
to receive via interconnectors, with further projects also in the pipeline.
Notes to editors
We are working towards the objective of an integrated European energy market
that ensures security of supply with an overall lower cost for consumers.
This will include a pan-European approach to cross-border participation
in capacity mechanisms. In the interim, to ensure that the investment opportunity
for interconnectors is preserved and to promote competition in the Capacity
Market auction, we have decided to enable interconnectors to participate
directly in the Capacity Market from 2015 for the four-year-ahead capacity
auction.
The eligible capacity of each interconnector will be determined on a case
by case basis for the Capacity Market, taking into account both their technical
reliability and an assessment of the likely future direction of electricity
flows at times of stress. They will participate in the auction like any
other resource and will be eligible for one year agreements and subject
to the same obligations and rules of participation as domestic capacity
providers.
Full details of the government’s response to the consultation on Capacity
Market Supplementary Design Proposals and Transitional Arrangement will
be published early in the New Year, as secondary legislation is put before
Parliament.
