UK must take steps to tap cheaper overseas generators

The UK government should open its capacity market scheme to power generators operating abroad in order to meet demand for low carbon electricity at the lowest cost to consumers, a leading think tank has urged.

The report from Policy Exchange said the UK should tap into cheaper electricity generated in continental European markets via undersea power cables, saying it could have an economic benefit as high as £1 billion per year.

“For example, while offshore wind currently costs the UK £85 per tonne of carbon that is saved, an interconnector between Great Britain and Norway would cost just £17,” the report explains.

But the benefits of interconnection are being hampered by “policy barriers” which must be overturned, the report says.

Currently overseas generators and interconnectors are not included in the government’s capacity market auctions which allow plants to compete for government subsidies in exchange for supplying power when needed.

In addition, European regulations limit profits on interconnectors, which makes investing in interconnection less attractive to potential backers, the report says.

“Installing more power lines between the UK and Europe could help the UK cut energy bills and meet our aggressive carbon targets more cost-effectively. But misguided regulation from the EU is getting in the way of interconnectors being built to Britain,” said the report’s author, Simon Moore.

Moore added that the UK is already on the road to increasing interconnection capacity with neighbouring countries and should not be sidetracked by what he calls “secondary goals” relating to domestic job creation.

“Great Britain already has four operational interconnectors (to France, the Netherlands Ireland and Northern Ireland). At least eight more interconnectors are in various stages of development,” he said.

“The government must focus on delivering the cheapest, greenest electricity for people and businesses. It must not be distracted by secondary goals like ‘green jobs’ that risk pushing up the cost of electricity.”