Calls for rapid return to implicit trading for interconnectors

Constructing a pan-North Sea grid will be “difficult” unless the UK can restore the closer electricity trading relationships that it had with EU countries pre-Brexit, a senior National Grid official has warned.

Trading over the interconnectors, which link the UK and EU grids, has reverted to the so-called explicit trading arrangements that were in place until the introduction of market coupling in the trading bloc’s Internal Energy Market.

Under the more up-to-date implicit trading arrangements, which cover most EU countries, an algorithm allocates capacity on the interconnector when a request is submitted.

However, with the UK having returned to explicit trading, those seeking capacity on interconnectors must once again physically book capacity.

Matt Hinde, head of EU affairs at National Grid, told a meeting of the House of Lords EU environment sub-committee yesterday (4 February) that implicit trading is “preferable” to help create the North Sea grid seen as key to dramatically increasing UK offshore wind generation.

“With point-to-point interconnectors you can run on the basis of explicit trading. With meshed grids and lots of different interconnectors and wind farms, it would be quite difficult without the sophistication of implicit trading,” he said.

He said it would be preferable too for the UK to rejoin the European Commission’s North Sea Energy Co-operation project, which seeks to promote the integration of the region’s power resources through projects like interconnectors, rather than to duplicate this arrangement with a new body.

But Hinde said that while the reduced efficiency of trading over the interconnectors would mean additional costs for energy consumers over the long term, there had been no disruption to energy flows since the UK-EU trade and co-operation agreement (TCA) came into force on New Year’s Day.

Energy UK chief executive Emma Pinchbeck told the peers that the kind of collaboration required to deliver a grid across the North Sea would only work on the basis of integrated markets including for carbon.

She said that taking forward proposals in the trade agreement to secure a linkage between the UK and EU energy trading system should be a “real priority” for the UK government.

Pinchbeck also expressed concern that the Department for Business, Energy & Industrial Strategy (BEIS), unlike the European Commission, has not yet set up a team of officials to implement the TCA.

“We need to crack on and deliver. I am particularly worried about bandwidth in government to deliver both domestic priorities and the TCA.”

The Lords EU environment sub-committee is conducting a short inquiry into how the TCA is operating vis-à-vis energy and the environment.