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Netherlands & France cash in on UK Winter Electricity according to UK Government report

By: Chris Anderson 17/07/2015 Chris Anderson

General Grid Interconnectors

Today OFGEM published their report - Electricity security of supply - A commentary on National Grid’s Future Energy Scenarios for the next three winters" where we see that National Grid has updated its assumptions for 2015 and now assumes that GB will see significant net imports of around 1.1 GW.

Total imports from Continental Europe (+1.8 GW) are expected to exceed exports to Ireland (-0.75 GW). This assumption is based on analysis of historical flows, feedback from industry and the outlook for our interconnected markets.

Interconnection capacity between GB and its neighbouring markets is currently 3.8 GW;
this breaks down to 3 GW between GB and Continental Europe (2 GW with France and 1 GW with the Netherlands), and 0.8 GW with Ireland. The FES assumes no changes to interconnector capacity with Continental Europe during the analysis period 39 despite.

In recent years GB has typically imported power from Continental Europe. OFGEM's sensitivity assumes that conditions in interconnected continental markets, the potential increased supply scarcity in GB and market reforms will help maintain imports. Prices in GB have historically been higher than in the Netherlands and France, incentivising imports to GB.

The price differential has broadly increased in recent years. The Netherlands has a domestic generation surplus and is connected to other well-supplied markets (ie Norway and Germany) however the outlook for France is more uncertain as margins are expected to tighten; exports to GB are still likely unless cold temperatures - the primary reason for potential tightness in France - coincide with tight margins in GB.

Higher risks to security of supply and sharper imbalance prices could further incentivise continental imports and reinforce this trend. Since OFGEM's 2014 report, we have seen evidence that GB’s interconnectors with Continental Europe flow towards the efficient direction more frequently (ie towards the market with higher prices) after GB joined the day-ahead market coupling zone of north-western Europe.

While OFGEM have not estimated the price differential between GB and the Continental European markets, OFGEM would expect high imports from the continent as the most likely outcome given the factors above

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Netherlands & France cash in on UK Winter Electricity according to UK Government report

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