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Norway-German power cable start lifts Nordic prices

Highlights

Norway's NO2 zone settled at Eur100/MWh for hour 18

Flows started Dec.9 hour 10, limited to 700 MW

Full commissioning set for spring: Tennet

London — The start of commercial operations on the new 1.4-GW NordLink cable linking Norway and Germany on Dec. 9 boosted hourly power prices in Norway's NO2 zone to almost Eur100/MWh ($121/MWh), grid operator and exchange data show.

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The first hour where capacities were released to the market was hour 10 on Dec. 9 with capacity limited to 700 MW for system security reasons for a maximum duration of up to four weeks, the operators said in a market update.

"Today, we have directly connected the electricity markets of Norway and Germany for the first time," Tennet's managing director for Germany Tim Meyerjuergens said.

"Norwegian hydropower and German wind energy complement each other in this system in an optimal way," he added.

NordLink is a cooperation between Norwegian grid operator Statnett, Tennet and German state investment bank KfW with Eur2 billion ($2.4 billion) having been invested.

Statnett in September said it was "disappointed" that Germany set the annual minimum import capacity on the cable at 11.7% for 2021 rising only gradually to 70% by 2026.

The reason for the restrictions is limitations on the power grid on the German side, it said after the German authorities informed Norway how capacity would be handled in the transition period to end-2025.

"We are proud that our new interconnector is ready for energy exchange between our two countries," Statnett vice president Gunnar Lovas said Dec. 9 adding that "NordLink will help us achieve our climate goals and create value on both the Norwegian and German side of the cable."

Capacity calculations

Transmission capacity that will be put on the market is the result of the latest calculation by Tennet and Statnett, it said with available capacity integrated into European market coupling of the day-ahead and intraday markets.

The price difference between Norway and Germany would determine the direction of flows, it said adding that "it can be expected that in most cases the country exporting will be the one which brings the lower price into the market."

Germany operates a single power market price zone after the split with Austria 2018, while Nordic countries have split zones.

In preparation for NordLink's market entry a webinar in November gave 180 market participants such as energy traders, power exchanges, transmission system operators and regulators comprehensive information on market-related issues such as capacity calculation.

"We presented transparently how we calculate capacity, how it is offered to the market and what can be expected from NordLink in its first years of operation," Tennet said adding that this "also created a better understanding of the challenges facing transmission system operators."

Once the trial operation phase is completed, the cable is expected to be fully tested and completed in spring 2021, it said.

NordLink's landing point in Germany northeast of Hamburg is in the so-called grid saturation zone close to the Danish border.

Available transmission capacity on that border is pegged at a minimum 1.1 GW for 2020 out of a total 1.8 GW after a joint government declaration after available capacity fell below 200 MW in 2016, prompting a Danish complaint to the European Commission.

The new 700-MW Cobra cable linking Denmark directly with the Netherlands since 2019 is currently offline due to a cable fault.

Statnett is also building a 1.4-GW sea cable to the UK planned for completion in 2021, with Denmark planning a similar link (Viking Link) to help integrate surplus wind into European electricity markets.

Wind lull

The current lull in wind power across Northern Europe has lifted spot prices to multi-year highs with Germany settling the day-ahead auction for Dec. 9 at Eur75.03/MWh, while Norway's NO2 zone settled at Eur31.72/MWh, Epex Spot data show.

German hourly prices spiked at hour 18 at Eur114/MWh, market-coupled exactly at that level with Denmark as well as its partners in the flow-based market coupled Central Western Europe (FBMC CWE) region including Austria, France and the Benelux countries.

Nordic power forward prices which include Norway, Sweden, Denmark, Finland and the Baltic states have fallen well below German forward power deep into the 2020s with Germany's nuclear and coal phase-out expected to lift German prices further.

Nordic power traded above Germany during a very dry summer 2018.

German baseload power for 2021 trades above Eur40/MWh compared below Eur20/MWh for Nordic 2021 power, exchange data show.

Norway's power zones are generally the lowest-priced in the Nordic system due to its massive hydro power potential.