The government has initiated a consultation to improve cross-border trading with Europe following the Brexit decoupling from the common market.
Up until January 1, Britain’s electricity market was part of the EU internal energy market, operating with a same day-ahead price through the European Power Exchange (Epex) and Nord Pool operators.
However, with the completion of the country’s exit from the region, electricity is no longer traded through the market coupling regime. Instead, interconnector capacity is sold to the market separately and independently through explicit auction, settling and clearing at different and independent prices.
The government’s department of Business, Energy and Industrial Strategy is now proposing that “arrangements should be put in place between the ‘relevant day-ahead markets’ to support the formation of a single GB clearing price.”
As such, this also would comply with the Trade and Cooperation Agreement, which commits the two parties to strengthen and support their shared energy objectives by inter alia ensuring the efficient use of electricity interconnectors including selling capacity on the interconnector and electricity together.
Specifically, BEIS considers that the ‘relevant day-ahead markets’ are the two daily hourly GB auctions which currently take place at 09:20 and 09:50, and are most likely to maximise the benefits of cross-border trade by providing the most reliable market information. These were the two auctions previously coupled by Epex and Nord Pool when Britain was part of the common market.
Britain has had four European interconnectors to Ireland, France, Belgium and the Netherlands. A fifth, the North Sea Link connecting Britain and Norway, came into operation on October 1 with Nord Pool operating implicit daily auctions.
BEIS considers that a single GB clearing price will support the effective implementation of the so-called multi-region loose volume coupling (MRLVC) trading model, which is designed to optimise connector flows with the objective of maximising the benefits of trade.
The proposals are open to consultation until October 28. Whether or not the proposal would ease the energy crisis driven by high gas prices is an open question but present and future regional interconnections are set to comprise an important component of the market for the foreseeable future.