The private and social value of British electrical interconnectors

David M Newbery, Giorgio Gissey, Bowei Guo and Paul Dodds
Authors registered in the RePEc Author Service: Baoping Guo and Bowei Guo

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: Interconnectors have value for Britain, providing access to cheaper Continental power, security of supply, and managing increased renewables, prompting proposals for substantial new interconnectors. The EU Target Electricity Model requires interconnector market coupling via Day Ahead and IntraDay Markets. We examine the efficiency and value of uncoupled and coupled trading for the four DC interconnectors to GB, over different timescales from year ahead to intraday, and the social costs and benefits not reflected in the private benefits. IFA and BritNed have a commercial value of about €500 million/yr and create additional surplus of €25 m./yr. The island of Ireland coupled on 1 Oct 2018, dramatically reducing trading inefficiency. Because the GB carbon tax is not replicated abroad it transfers some €40 m./yr to the foreign share of IFA and BritNed as well as adding distortionary costs when trade flows change. The policy implication is that while further investment in interconnectors appears socially profitable, it is important to harmonise carbon taxes across the EU. If GB leaves the EU and is uncoupled, some of these trading gains would be sacrificed, but other financial markets may alleviate the cost of Brexit, making policies to enhance liquidity desirable.

Keywords: Interconnectors; market coupling; hedging; social value (search for similar items in EconPapers)
JEL-codes: C54 D40 D44 D47 F14 H23 L94 Q48 (search for similar items in EconPapers)
Date: 2019-04-15
New Economics Papers: this item is included in nep-ene and nep-reg
Note: dmgn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://www.econ.cam.ac.uk/sites/default/files/pub ... pe-pdfs/cwpe1941.pdf

Related works:
Journal Article: The private and social value of British electrical interconnectors (2019)
Working Paper: The private and social value of British electrical interconnectors (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:1941

Access Statistics for this paper

More papers in Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge
Bibliographic data for series maintained by Jake Dyer ().