Brexit cuts trading on GB-Ireland interconnectors fueling power prices
Britain’s exit from the EU has resulted in reduced trading on the electricity interconnectors between GB and Ireland and increased the frequency of extreme prices, data consultancy EnAppSys said.
The GB electricity market left the internal energy market of the European Union (IEM) following the end of the Brexit transition period on January 1, 2021. As part of the withdrawal agreement between the UK and the EU, the Northern Ireland protocol ensured that the single electricity market (SEM) of the island of Ireland would remain intact.
However, the effect of the GB electricity market leaving the IEM has still resulted in a decrease in the use of the SEM’s interconnectors that link it with Britain, EnAppSys said in an emailed note.
Average utilisation in January was around 350MW, compared with 500MW prior to Brexit. The January figure was the typical level when one of the interconnectors suffered an outage before the GB left the IEM.
EnAppSys said this reduced usage had led to an increase in the frequency of extreme prices as liquidity decreased.
“Before Brexit, the SEM was coupled with the IEM via the two interconnectors to GB, via a common day-ahead auction that ran at 11AM for the following day,” EnAppSys Director Phil Hewitt said. This ensured that if prices were higher in the SEM than in GB, energy would flow from GB to the SEM to reduce prices for consumers in the SEM and vice versa,” he added.
With GB leaving the IEM, the two markets are no longer coupled across the two interconnectors that link both islands – the island of GB and the island of Ireland – for the common 11AM day-ahead auction, he said.
“As the interconnectors no longer participate in this auction, the liquidity pool is therefore reduced, both in the SEM and the GB market. This means that prices in both markets will be more extreme as they no longer share energy at the day-ahead stage,” Hewitt said, adding that for the 11AM day-ahead auction, 11 of the 14 highest prices ever seen have occurred since Britain left the IEM with the peak value being €500/MWh equivalent to 50c per kWh unit.
“Also, because there is less volume than capacity in the IDA1 and IDA2 intraday auctions, which now are the only auctions that determine the interconnector flows between GB and the SEM, this means that the interconnectors are utilised less. In turn, this means that the SEM needs access to more indigenous generation which may be more expensive than in GB. In addition, when it is windy in Ireland there is less opportunity to push this excess wind energy over the interconnector to GB,” Hewitt said.
According to that EnAppSys Director it’s likely that the reduction in the ability to bring in cheaper power from GB or export cheaper power to GB will result in more extreme prices in the future. “The current situation with lower-than-usual dispatch on the interconnectors will continue until SEM market participants increase their use of the IDA1 and IDA2 auctions,” he said, adding, “This also requires more participation on the GB side”.
