Move to smooth recoupling of EU and GB wholesale markets

The government has decided to legislate to re-establish a single Great Britain day-ahead clearing price for interconnector-traded electricity in a move that could help recouple the wholesale market with the EU’s.

Since Brexit, when the UK had to leave the EU’s Internal Electricity Market (IEM), traders have been required to physically book day-ahead capacity on grid interconnectors with neighbouring countries and then participate in power auctions every day to determine the prices of electricity.

The auctions, which are run by the European Power Exchange EPEX Spot SE (EPEX) and Nord Pool AS (NP), take place at 9.20am and 9.50am respectively.

This can lead to divergences of more than £10/MWh between the prices offered on the two exchanges, according to responses to a government consultation on recoupling EU-GB wholesale electricity trading arrangements.

On tight days, when low domestic generation means Britain would benefit from efficient interconnector imports, significant price divergences between the two exchanges has made it difficult for market participants to manage risk, it says.

Introducing a single GB clearing price by recoupling the EPEX and NP auctions would be highly beneficial and support more efficient trade of electricity over interconnectors, says the response.

The move would also help the UK to discharge its obligations under the UK-EU Trade and Cooperation Agreement to improve the efficiency of cross-border electricity trading arrangements through the introduction of an algorithm-based model, like that used throughout the IEM, it says.

The government consulted on the re-establishment of a single clearing price in 2021 but the paper says that efforts since then to broker a voluntary arrangement between the two exchanges have seen no substantive progress, prompting the government’s move to legislate.

The bulk of the UK’s interconnectors run between GB and EU member states with Northern Ireland’s forming part of the Single Electricity Market that covers the whole of the island of Ireland.