Skip to content

World’s longest subsea power link to generate at least £1.3bn income for National Grid

October 20, 2016
tags:

By Paul Homewood

 

h/t Green Sand

 

image

http://www.telegraph.co.uk/business/2016/10/18/worlds-longest-subsea-power-link-to-earn-national-grid-at-least/

 

From the Telegraph:

 

National Grid is to be guaranteed a minimum of £1.3bn income for building the world’s longest subsea power cable to import electricity from Norway.

Energy regulator Ofgem on Tuesday announced plans for consumers to guarantee the utility giant at least £53m annual revenues for 25 years in return for its 50pc investment in the £1.4bn North Sea Link interconnector.

The 450-mile cable from Blyth in Northumberland to Kvilldal in Norway is due to be built by 2021 and will be the first electricity link between the two countries.

It will be able to import or export up to 1.4 gigawatts (GW) of electricity – enough to power about three quarters of a million UK homes.

Interconnector owners make their income by selling companies access to their cable to trade power.

However, Ofgem is keen to encourage investment in the cables and has introduced a "cap and floor" regime guaranteeing developers a minimum income, backed up by consumer subsidies if needed, while also limiting their total revenues.

Ofgem said the minimum £1.3bn revenue that National Grid would be guaranteed by consumers compared with estimated benefits to consumers of £3.5bn by accessing cheaper power from Norway.

The proposed cap has been set at £94m a year, or £2.3bn over the 25 year support regime. Beyond that, any revenues would be paid back to consumers.

http://www.telegraph.co.uk/business/2016/10/18/worlds-longest-subsea-power-link-to-earn-national-grid-at-least/

 

The “cap and floor” guarantee covers revenues from selling of capacity and any payments received under the capacity market mechanism. Not included is revenue from actual electricity sold.

The cost of the arrangement is passed onto consumers, and is indexed to RPI.

 

Ofgem have based the guarantee on capacity utilisation of 93%, which therefore would yield 11.4 TWh annually. With a range of £53 to £94 million, this would yield a cost of £4.65 to £8.24 / MWh, on top of the electricity purchased from Norway.

It remains to be seen what price the latter will be.  

9 Comments leave one →
  1. A C Osborn permalink
    October 20, 2016 11:22 am

    That is good, they can use it to lower all our energy bills.
    Which is never going to happen is it, profit all the way.

  2. rwoollaston permalink
    October 20, 2016 11:44 am

    I think this is very good news. Norway has one of the lowest electricity prices in Europe. Excluding taxes and grid charges the retail price of electricity is just 3p/KwH. See https://www.ssb.no/en/energi-og-industri/statistikker/elkraftpris/kvartal/2016-05-31 for more price information.

  3. Gerry, England permalink
    October 20, 2016 12:48 pm

    In a sane world why would we need to import electricity anyway? Still, looking on the bright side (no pun intended) it should be good for my National Grid dividends.

  4. October 20, 2016 1:23 pm

    Ofgem needs to get out of bed with National Grid, here they approve more access to bill payers bank accounts, whilst saying nothing about the recent woeful winter outlook report, which seems designed to hide the parlous state of GB electricity supply (by for example awarding wind a 21% capacity credit, when it has fallen to around 5% on recent winter peak demand days).

    • Graeme No.3 permalink
      October 20, 2016 6:52 pm

      But they have this cosy relationship, what with Ofgem free to spend other people’s money without permission or warning, and the National Grid free to come up with schemes that sound good – until you start examining them.
      Where is the electricity going to come from? Obviously Ofgem has convinced itself that a lot more wind turbines are going to be installed, leading to more fluctuations and further closures of conventional generation. The interconnectors to France don’t carry much away from the UK. Norway is already supplying deficiencies in the Danish system and now the German grids, from run of river hydro mainly. It is unlikely that they will have much surplus capacity when the UK, Danish and German turbines are all not working, so any electricity coming into the UK with be higher priced, and any exports at times of glut will be at a much lower price.

      Great business for the Norwegians and no problem for the National Grid because they have a guarantee, but I wonder if anybody in Ofgem has heard the fable about the camel and the extra (ton of) straw?

    • Gerry, England permalink
      October 21, 2016 12:44 pm

      I read that more contracts for diesel generation have been placed to keep the lights on and the economy running, but at a huge cost of course.

  5. manicbeancounter permalink
    October 20, 2016 7:13 pm

    A much shorter undersea cable would be to Aberdeen. But then an independent Scotland would have even more subsidized and useless wind energy to sell to the English.

    • It doesn't add up... permalink
      October 21, 2016 11:06 pm

      If the cable ran to Scotland they could export surplus energy at negative prices to Norway, who would either sell it on if they had export demand, or turn off their hydro. Of course, we English would presumably be on the hook for the full CFD price to subsidise the exports.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: