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Feature: New French connections set to boost European power flows

London — Four new European power interconnectors are due to start operations in 2020, all aimed at integrating renewables, boosting system security and reducing price discrepancies between markets.

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France, already Europe's biggest exporter of electricity, dominates the story, with two new links to Great Britain and one to Italy due for completion next year.

The fourth gives a glimpse of the future in the shape of the hybrid Combined Grid Solutions, linking German and Danish (Zealand) markets via offshore wind farms in one project.

France's central role in 2020 interconnection action makes sense. It has Europe's largest structural surplus of baseload generation due to its massive nuclear fleet, but remains vulnerable to spikes in cold-snap winter demand driven by electric heating.

"Increased interconnection inevitably smooths out price differences between countries in the longer term, but over the next five years we see factors such as nuclear/coal closures in Germany, strong Spanish renewables growth and a potential realignment of Britain's carbon cost as having a major impact on border spreads and flow direction," Platts Analytics Glenn Rickson said.

If 2020 is to be the year of French interconnection, in 2021 it will be Norway's turn.

FRENCH CONNECTIONS

Over 450 TWh flowed across Europe's borders in 2018, a volume that could increase by as much as 20% as a result of 10 GW of additional interconnection coming online from 2019 through to end-2021.

The three new French power links to Great Britain and Italy are set to lift French transmission capacity on its six borders towards 20 GW.

Only Italy is set to remain a clear premium market despite a fourth HVDC interconnector (Piedmont-Savoie) set to boost transmission capacity to 4.4 GW.

The new link across the Alps is set to come online from the middle of next year, but such projects often face delays and long testing phases.

French flows on the German/Belgian (CWE), GB and Spanish borders are already experiencing frequent reversals even switching multiple times in a single day when supply-demand fundamentals are particularly volatile.

GERMANY'S SHRINKING EXPORT SURPLUS

As the links go in, the pricing dynamics determining flows are changing.

Germany's current wholesale power price discount to neighboring markets, for instance, is set to evaporate in the years to 2023 as nuclear and coal closures potentially turn Europe's biggest economy into a net importer of electricity.

Germany was Europe's biggest net exporter of electricity in 2017 with cross-border flows with its nine "electrical neighbors" still the highest in Europe.

New links to the Netherlands, Belgium, Denmark, Norway and Austria are set to increase flows even if the net balance shrinks.

VIKING LINKS

Meanwhile expectations of growing wind capacity in the UK and the Nordics have already triggered plans for new interconnectors linking the regions closer to the Continent.

New links to Norway and Denmark as well as France, Belgium and Ireland could almost triple Great Britain's cross-border capacity over coming years, bringing much closer price alignment with its Continental neighbors.

Two 1 GW links are set to come online in 2020 (ElecLink and IFA 2 both linking GB to France), with DC cable-hauling operations set to start in the Eurotunnel, operator GetLink said December 2.

70% NTC RULE

Finally the debate around the EU's net transfer capacity regulation has been hotting up ahead of application of the 70% availability rule.

The regulation requires national transmission system operators to make at least 70% of net transfer capacity (NTC) on interconnections available for cross-border trading.

It takes effect from January 1, 2020 but exemptions apply with the CWE region (France, Germany, Austria, Benelux) already applying a 20% rule.

The 2025 target leaves TSOs just 30% of capacity to manage loop flows and internal congestion, and to maintain a reliability margin.

The issue is particularly sensitive in Germany, where capacity is limited by internal bottlenecks, with key internal grid projects delayed to around 2025.

A spokesman for Amprion, one of Germany's four TSOs, said the new rules require an annual increase of around 10 percentage points, with German TSOs not yet able to quantify the available capacity required.

Meanwhile, Belgian TSO Elia has also requested exemption from the rule.

Structural congestion would normally be the reason for such a request but in Elia's case, the application is rooted in the uncertainties associated with the new rules and the absence of underlying methodologies.

Belgium has no control over loop flows through its network and there would be operational safety risks if Elia were required to adhere strictly to the 70% rule, it has said.

Utility and trading associations Eurelectric and Efet have criticized having a single fixed EU target for border trading capacity, arguing that any such targets should be tailored for each border with significant differences in size and geographical location between markets and bidding zones.

-- Andreas Franke, andreas.franke@spglobal.com

-- Edited by James Leech, newsdesk@spglobal.com