Brearley warns against ‘tit for tat’ interconnector closures

It would be risky to get into “tit for tat” exchanges with other European countries by holding back power on the UK’s interconnectors, Jonathan Brearley has warned.

The Ofgem chief executive was pressed by ex-environment secretary Therese Coffey on whether the UK’s interconnectors should prioritise the needs of domestic customers, while giving evidence at the final oral evidence session of the House of Commons energy security and net zero committee before prime minister Rishi Sunak called the general election.

Brearley said that as more “inflexible” generation, like wind and solar, comes onto the energy system across Europe, the UK and neighbouring countries will have a “shared set of systemic risks”.

“The best way to deal with that is to have connected markets that can manage that,” he said, pointing to the co-operation between the British and French system operators during the energy crisis sparked by Russia’s invasion of Ukraine.

While Ofgem has “emergency powers” to stop electricity exports “in extremis”, it is “very mindful about the impact on relationships” with neighbouring countries, Brearley said: “In most circumstances you are better off co-ordinating closely and making sure everyone has enough supply and the problem is shared.

“There were times when electricity was tight and the British and French energy system operators would work very closely. If we get into a tit for tat that is risky.”

Brearley was also quizzed on why Ofgem had not awarded more approvals for ‘cap & floor’ contracts to interconnector projects, after it provisionally vetoed six electricity interconnector projects in March.

“We are in the process of examining other benefits of interconnectors, which include security of supply,” Brearley said, adding that this may lead to more projects being identified for support.

“Cost doesn’t trump other objectives in the market” he said in the session, which was held as part of the committee’s inquiry into energy bills for domestic customers.

Tim Jarvis, Ofgem’s director general, markets, added that one of the “biggest challenges” is that bad debt has increased from £2 billion to £3 billion over the last 12 months.

The much bigger increase in the total sum than the in the numbers falling into bad debt suggests some customers are falling further behind on their bills, he added.

Brearley told the meeting, which was held ahead of the latest price cap announcement, that while energy markets have stabilised and prices have come down, they are “still significantly higher than were before. The best estimate is that prices will still be high and volatile over time.”