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ID:
150648
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| Summary/Abstract |
The European Commission's Target Electricity Model (TEM) aims to integrate EU electricity markets. This paper estimates the potential benefit of coupling interconnectors to increase the efficiency of trading day-ahead, intra-day and balancing services across borders. Further gains are possible by eliminating unscheduled flows and avoiding the curtailment of renewables with better market design. In the short run the gains could be as high as €3.9 billion/yr, more than 100% of the current gains from trade. About one-quarter of this total comes from day-ahead coupling and another third from shared balancing. If shared balancing is so valuable, completing the TEM becomes more urgent, and regulators should ensure these gains are paid to interconnectors to make the needed investment in the cross-border links more commercially profitable.
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| 2 |
ID:
177439
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| Summary/Abstract |
A model of the European electricity system is used to analyse the impact of increasing interconnection levels between Great Britain and its European neighbours. Scenarios are assessed for 2020, 2025 and 2030. Several policy questions are highlighted around the assessment criteria for approving interconnector projects and the viability of existing investment and remuneration models. Results show that a GB specific carbon tax in 2020 contributes to a relatively high cost of energy and therefore high imports into GB. Increasing GB interconnection capacity in 2020 from 5 GW to 8.4 GW facilitates additional imports and brings down the annual cost of electricity for GB consumers by €639m. Analysis for 2025 and 2030 shows that additional interconnectors, the removal of the additional GB carbon tax and changes to the generation background lead to GB experiencing increased interconnector exports and reduced interconnector utilisation. This lessens or reverses the impact of new GB interconnection on GB consumer prices. It also leads to a significant reduction in revenue potential for future interconnectors. Carbon emission analysis indicates that inconsistencies in carbon pricing across different countries, like the extra GB price support, can lead to perverse outcomes with reduced GB emissions but increased total European emissions.
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| 3 |
ID:
150615
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| Summary/Abstract |
In the energy trilemma of reliability, sustainability and affordability, politicians treat reliability as over-riding. The EU assumes the energy-only Target Electricity Model will deliver reliability but the UK argues that a capacity remuneration mechanism is needed. This paper argues that capacity auctions tend to over-procure capacity, exacerbating the missing money problem they were designed to address. The bias is further exacerbated by failing to address some of the missing market problems also neglected in the debate. It examines the case for, criticisms of, and outcome of the first GB capacity auction and problems of trading between different capacity markets.
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| 4 |
ID:
168652
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| Summary/Abstract |
Interconnectors have value for Britain, providing access to cheaper Continental power, security of supply, and managing increased renewables, prompting proposals for substantial new interconnectors. The EU Target Electricity Model requires interconnector market coupling via Day Ahead and IntraDay Markets. We examine the efficiency and value of uncoupled and coupled trading for the four DC interconnectors to GB, over different timescales from year ahead to intraday, and the social costs and benefits not reflected in the private benefits. Because the GB carbon tax is not replicated abroad it transfers some €65 m./yr to the foreign interconnector part-owners and creates distortions when trade flows change. IFA and BritNed have a commercial value of about €500 million/yr, create additional infra-marginal surplus of €25 m./yr, but suffer €30 m./yr deadweight loss from the asymmetric GB carbon tax. The island of Ireland was coupled in Oct 2018, dramatically reducing trading inefficiency. While further investment in interconnectors appears socially profitable, it is important to harmonise carbon taxes across the EU. If GB leaves the EU and is uncoupled, some of these trading gains would be sacrificed, but other financial markets may alleviate the cost of Brexit, making policies to enhance liquidity desirable.
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