UK capacity allocation revenue on Belgium-UK power link doubles on year

Cross zonal capacity allocation revenue on Belgium's Nemo Link power interconnector to the UK more than doubled last year, data reported to UK regulator Ofgem showed March 28.

Capacity prices on all subsea power links to the UK soared last year, reflecting tighter generation margins and rising gas and carbon costs.

At Eur31.04/MWh, the price of December 2021 capacity on Nemo Link (Belgium to UK) was up 244% on December 2020's outturn of Eur9.00/MWh.

Less extreme revenue hikes were recorded on the IFA link to France and the EWIC link to the Republic of Ireland due to a fire-related outage at a substation in Kent (France) and reduced utilization following the post-Brexit loss of market coupling (Ireland).

The regulator is required to publish an annual report on interconnector revenues collected from the allocation of capacity, and a breakdown of the actual use of revenues by national transmission system operators.

Revenues from the allocation of cross-zonal capacity must be prioritized to maintain or increase availability of the capacity.

Also known as congestion revenues, the funds can also be used for tariff calculation once availability is adequately achieved. Any residual revenues are then placed on a separate internal account for future use.

"The Authority verifies that the revenues taken into account when setting network tariffs comply with the Retained Electricity Regulation," Ofgem said.

The UK imported 27.71 TWh last year, equivalent to 10.46% of UK demand, system data showed.

French imports accounted for 49% of total import volume, followed by Belgium (25%), the Netherlands (15%) and Norway (6%). Ireland and Northern Ireland supplied 5.10%.

As of Jan. 1, 2021 the UK's power interconnectors ceased participating in the EU's dedicated Single Market platforms, with trade moving from implicit to explicit auctions, hosted by the Joint Allocation Office.

On Jan. 22 the 1 GW IFA2 electricity interconnector between France and the UK entered operation.

The 1.4 GW NSL interconnector with Norway began operation in October 2021 at half capacity. Despite this, revenues topped GBP70 million for the final quarter.

UK POWER INTERCONNECTOR REVENUE (GBP mil)

Source: Ofgem