ABSTRACT
As the UK moves towards a low-carbon economy, powered increasingly by intermittent renewables, it is redefining its energy relationship with its Nordic neighbours, looking away from fossil fuels and to greater electricity interconnection. Connecting the UK electricity grid to Denmark, Norway and Iceland requires high capital costs and pushes technical boundaries compared to geographically closer alternatives, but has the potential to deliver significant benefits for the UK’s security of supply and consumer prices, while accelerating the decarbonisation of electricity.
Interconnection with Denmark offers benefits on both sides of the cable, despite potential increased consumer prices in Denmark, due to the synchronicity of both countries’ growing wind production systems. Norway’s hydro-dominated system and zero-carbon marginal generation combined with its pumped storage capacity offer unique opportunities for the UK to reduce the carbon intensity of its electricity supply and access pumped storage capacity. IceLink, the most ambitious and complex of the UK’s proposed interconnectors, can deliver significant benefits to both parties, but the technical and political complexities of the cable and the required additional generation capacity needed in Iceland may generate uncertainty about the long-discussed future of this link.
All the while, the UK is in the process of leaving the EU, and attempting to negotiate an as yet unknown future relationship with the bloc. For interconnectors, while the fundamental benefits of increased interconnection remain, Brexit brings into question the extent to which the UK can be integrated into the EU’s Internal Energy Market (IEM). Added to uncertainties over financing and regulatory issues, it is widely viewed that both the UK and EU would be best served by continued barrier-free IEM access with full regulatory alignment on energy.
