No legal barriers to cross-border electricity trading in no-deal Brexit scenario

National Grid has given assurances there will be no legal barriers to continued cross-border electricity trading in the case of a no-deal Brexit.

However, the company warned recent changes to day-ahead trading arrangements will have to be rolled back if the UK leaves the EU without a withdrawal agreement. Planned reforms to intraday trading arrangements will also need to be scrapped.

Speaking at a media briefing at the UK converter station for the BritNed interconnector to the Netherlands, National Grid interconnectors regulation manager Mark Duffield, said: “We’ve done quite a lot of internal analysis. We’ve also commissioned external opinions from a couple of law firms.

“They’ve been, and we’ve been and actually the government has been quite clear that there isn’t any kind of legal right or obligation that exists for interconnectors to have to be switched off.”

He continued: “At the highest level, we’re linking two national markets and those national markets will still exist as they currently do in their own right. There’ll still be a Dutch power market. There’ll still be a UK power market post-Brexit. They will still operate in their own national ways.

“The interconnector will still have a connection agreement in the UK under a UK framework. It will still have a connection agreement in the Netherlands under a Dutch framework. We’ll still have the right to import or export under those physical connection agreements.”

“The key thing is how we monetise that link,” he added. “We’ve got the physical right to flow between two nations. It’s making sure that the commercial arrangements still work and still allow people who want to flow to buy power in one market, sell it into another market and then secure the interconnected capacity to balance off that position”.

Duffield said the main issue in this regard is the day-ahead trading of interconnector capacity.

Since the coupling of day-ahead power markets in north west Europe in 2014, interconnector capacity in the region has been traded “implicitly” through exchanges.

Exchanges use the available capacity to minimise the price differentials between national markets. Operators are then paid for flows on the basis of the remaining spreads.

Duffield said interconnectors to the UK will be unable to continue operating under these arrangements if there is a no-deal Brexit. Day-ahead capacity will instead need to be bought and sold “explicitly”, meaning market participants will once again be responsible for procuring enough capacity to cover their positions.

Forward and intraday capacity is still traded explicitly via the Damas platform.

However, intraday power markets in Europe are currently in the process of being coupled as part of the Cross-Border Intraday (XBID) project.

The markets of 14 European countries were joined up on 12 June 2018 to enable the implicit trading of interconnector capacity. The UK’s intraday power market is also due to be integrated into the bloc in 2019.

Duffield said the reforms will have to be discarded if the UK leaves the EU without an agreement on their future relationship. He said the system operator at National Grid has already delayed implementation to avoid any potentially unnecessary disruption.

The coupling of day-ahead and intraday power markets are both part of the ongoing development of the EU’s internal energy market.

The 1GW BritNed interconnector is owned and operated by a joint venture between the Dutch transmission system operator TenneT and National Grid.

National Grid also owns and operates the 2GW IFA link through a joint venture with the French transmission system operator RTE. Alongside various European partners, the company is building or developing four further interconnectors to Belgium, Norway, France and Denmark with a combined capacity of 4.8GW.