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Brexit uncertainty affecting interconnector prospects

A total of nine power interconnector projects are being lined up to further enable UK energy security, however there is currently a pause in developments as managements wait for clarity to emerge from Brexit negotiations.

14 GW of capacity could be built by the end of 2022, according to data collected by market analysts ICIS. Were all the projects to come online this would quadruple the UK’s available interconnector supply.

Two new interconnectors are currently under construction that will offer potentially 2.4 GW of electricity import capacity to the grid by the end of 2021.

UK- Europe interconnectors

Both the 1 GW NEMO cable to Belgium and the 1.4 GW NSN Link to Norway are scheduled to come online in 2019 and 2021 respectively.

However the position is not as clear for other projects, with a total of 11.6 GW in capacity that could be added by 2022 not yet guaranteed, with Brexit negotiations ongoing.

Aquind, the 2 GW Interconnector planned for Portsmouth to France, received approval from energy regulator Ofgem in September this year and is hoping to be online by 2021. Speaking to Power Engineering International,à‚ Lord Callanan, a non-executive director, says the company is hoping any regulatory complications can be avoided.

“Brexit does change the European political landscape, but the actual risks are yet to be determined. Aquind interconnector project is on track and remains fully feasible. The Aquind Interconnector is a private project, which is being developed on the basis that the UK must increase its electricity interconnection. The project plans remain unchanged and the market fundamentals are strongly in favour of building it. British and French governments also continuously encourage private interconnector projects such as Aquind as well as further interconnection between the two countries.”

“An overarching factor, however, will be whether the UK remains in the European internal energy market, which would in effect mean the same rules for interconnectors when the UK leaves the EU. Aquind is strongly in favour for the current rules to remain in place after Brexit, which would lead to less regulatory challenges in the future.”

Frontier Economics’ director of energy Dan Roberts told ICIS website, “I think most scenarios point to a relatively benign world for interconnection under Brexit. The issue comes down to uncertainty.”

“While there is still some low probability, but high impact, doubt as to how it will play out, I find it hard to believe there isn’t some slowing down of capital commitments until the world gets clearer,” he added.

Pavlos Trichakis of Baringa Partners confirmed what his consultancy is seeing. “There is some evidence of developers moving to a ‘wait and see’ mode, certainly more so compared with previously. Since the Brexit vote, this has been mostly evident for power generation assets but interconnection assets may also be impacted.”

There is a fear that the UK coming out of the single energy market may result in imposition of tariffs on electricity imports, which could affect finances for developments.

However Roberts told ICIS this scenario is unlikely and that the UK operating outside the internal market on a World Trade Organisation-based deal would commit it to applying zero tariffs on imports.

Last month, a final investment decision on the 1GW IFA2 interconnector between Hampshire and France was pushed back to the end of January after the French regulator launched a further consultation on regulatory incentives in response to uncertainty caused by the UK’s vote to leave the EU.

Four of the nine projects have already secured conditional approval from British energy regulator Ofgem to finance under the ‘cap and floor’ mechanism. A further three projects are awaiting assessment from Ofgem over their eligibility for ‘cap and floor’ funding while the 1 GW Eleclink and 2 GW Aquind connections to France are merchant projects.

Eleclink see no threat to their project from Brexit. Spokesperson John Keeffe told Power Engineering International, “Brexit will have no impact in ElecLink. It is a bilateral, Franco-British project that will ensure energy security for the long term and is not dépendant on the UK’s position in or out of the EU.”