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OFGEM 'U' Turn over Greenlink?

4C Offshore | Chris Anderson
By: Chris Anderson 10/08/2015 Chris Anderson
Back in July we reported on UK's OFGEM (the Office of Gas and Electricity Markets acting as the regulator of the gas and electricity markets in Great Britain)  decision NOT to grant the Greenlink Power Interconnector project a Cap and Floor regime - the UK's new regulatory regime, known as a “cap and floor” designed to support the development of electricity interconnectors.

The Greenlink project is a proposed 500MW interconnector between GB and Ireland, being developed by Element Power.

Today OFGEM announced that they are proposing to change their assessment and issued an open letter to set out those changes and invite views on their merit. The change was based on what they call other information that has become available since the analysis conducted in the first quarter of this year.


New information to come to light has been:-
  • Integrated Single Electricity Market design published by the SEM committee in February 2015 suggests that the preferred market design is more likely to use the unconstrained wholesale price in the day-ahead market. This means that, compared with the analysis included in OFGEM's March 2015 consultation, the Irish day-ahead market price is likely to be lower than the GB price more often, or with a larger differential in existing lower-priced periods. This should lead to higher revenues for Greenlink and a greater value of overall imports into GB with GB consumers benefitting from lower wholesale prices.  
  • EP proposes to use an intertrip at the Greenlink. OFGEM understands that the intertrip would only be used if there was a system overload caused by a double circuit fault. This would avoid NGET having to take the actions which led to the constraint cost impacts being identified. NGET has agreed that the effect of Greenlink on local constraint costs, and subsequent impact on consumers, would be minimal if an intertrip was part of Greenlink’s connection design. Therefore, conditional on Greenlink’s final connection agreement confirming that there will be no constraint costs attributable to the project the negative impact can be removed from our assessment.
  • Greenlink could provide ancillary service benefits through fast frequency response (FFR) to GB, and whilst it is not known yet if this could be made available this could be a potentially significant benefit.

OFGEM now takes the view that the above points justify changes to their analysis, altering the modelling of Irish wholesale prices and mitigating the negative effect on GB constraint costs.
'Either of these changes alone would offset the projected negative effect in the base case in our March 2015 consultation, but would not necessarily provide a strong enough justification to grant a cap and floor regime. However, the combined effect of both changes, together with non-quantified upside potential from fast frequency response, would potentially provide such a justification.'


Whilst the open letter does not grant the  project developers the go-ahead they are looking for OFGEM is saying that if Element Power received a Cap and Floor agreement for its Greenwire project "it would be conditional on the final form of Greenlink’s connection terms not negatively affecting our updated analysis and on the I-SEM market design being as indicated above. OFGEM would also require confirmation that the Irish regulatory regime supported the other 50% of the value of the project.


OFGEM has stated that they will continue to review the detailed analysis submitted by Element Power and other relevant information submitted in consultation responses.
OFGEM plans to publish further information on this project soon.

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