Author: Munti Nguyen

UK TSOs publish Responses from the TSO group to technical questions on Multi-Region Loose Volume Coupling between EU and UK

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The UK transmission system operators and ENTSO-E have been mandated to provide a joint answer to a set of technical questions to the European Commission and the UK Department for Energy, Security and Net Zero on the proposed trading solution Multi-Region Loose Volume Coupling (MRLVC) agreed in the Trade and Corporation Agreement between the European Union and the United Kingdom of Great Britain and Northern Ireland to reintegrate the GB electricity market into the EU electricity market.

The answers to the set of technical questions are a joint work of the group of relevant TSOs (EU TSOs directly connected to the UK and UK TSOs). The work builds on the Cost Benefit Analysis (CBA) carried out in spring 2021 and aims to further explore and provide insight into the possible MRLVC design options proposed and assessed in the CBA.

The non-confidential version of the report can be found here.

EU CBAM impact study focused on electricity imports from Great Britain

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AFRY has today published an impact study report on the EU Carbon Border Adjustment Mechanism (CBAM), focused on electricity imports from Great Britain. The study was commissioned by Nemo Link and a group of interconnectors and transmission companies.

The report found that, although the principles and intentions of the EU CBAM are positive in the pursuit of decarbonisation, there are issues with the method of application which, unless addressed, unduly increase the cost of electricity imports into the EU from GB, presenting adverse outcomes for policy objectives, in particular: 

Two issues identified in the report:

  1. Risk of significant over-statement of emissions assumed for electricity imports from GB, as values based on carbon intensity of historic fossil fuel generation are likely to be applied.
  2. Excessive carbon price exposure for imports from GB, linked to practical obstacles to demonstration of a carbon price having been paid in GB by emitting generation and exposure of GB zero-carbon generation to carbon costs.

Resulting in the following adverse outcomes:

•    Putting at risk development of offshore grid/cross-border infrastructure needed for the energy transition;
•    Harming delivery of decarbonisation policies by presenting barriers to low carbon projects; and
•    Frustrating efficient market operation by unduly blocking flows that would otherwise be economic.

Action is needed to ensure efficient use of cross-border capacity. The report highlighted mitigation options as follows:

  • Short-term actions:
    • Implicitly recognise UK carbon price having been paid in GB for any electricity imports from GB into the EU via implementing acts.
    • Allow use of recent GB system carbon intensity measure as basis for GB export emissions.
  • Long-term actions:
    • Advance political agreement to create full ETS linkage
    • Ensure developing GB-EU implicit coupling model fulfils market integration requirements and political alignment on condition fulfilment.

“EU CBAM in its current form could create a very significant trade barrier for electricity imports into the EU even if the carbon prices in the third country are identical. This would negatively impact all dimensions of the energy trilemma. Political will is urgently called upon to get the identified issues addressed and an EU CBAM exemption for the UK e.g. via relinking the ETS schemes should be examined,” said Bart Goethals, Chief Commercial Officer, Nemo Link Ltd.

Full report can be downloaded here.

If you’d like to learn more about this study on the EU CBAM, AFRY will be hosting a webinar presenting the insights from its assessment, outlining the issues identified and their implications, on Monday 25th March 14.00 CET. Register HERE.

Nemo Link celebrates 5 years in operation

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Nemo Link celebrates its fourth anniversary with exceptional operational performance, supporting security of supply in both the UK and Belgium

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Nemo Link, the first electricity interconnector between the UK and Belgium, recorded exceptional performance in 2022. The subsea cable was available 99% of the time last year, making it one of the most reliable assets of its kind in the world. It’s also important to note that there was no unplanned maintenance during this period.

5.7 TWh of electricity were exchanged between the two countries in 2022. For the first time, the flows between the two countries were almost identical (with import flows to Belgium 45% of the time in 2022, against only 4% in 2021).

Nemo Link demonstrated how key its role is in strengthening security of supply for British and Belgian consumers. For example, in July, the 140 kilometer link avoided major supply problems in London.

The subsea interconnector also provides more opportunities for balancing grids and limiting the impact of imbalance between supply and demand, which is increasingly important with the growth of intermittent renewables. The additional flexibility provided by the high voltage direct current (HVDC) interconnector could limit peaks in imbalance prices.

Nemo Link is also the first interconnector to be delivered under the so-called ‘Cap and Floor’ regulatory framework, which sets a maximum and minimum revenue levels. The Belgian and British regulators have recently approved a Within Period Adjustment request by Nemo Link, which will deliver around  to consumers earlier than expected. This will result in grid tariffs being reduced by €67.2 million in each country.

Notice to bring into effect Nemo Link’s approved Access Rules from 1st January 2023

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We are pleased to announce that the Nemo Link’s modified Access Rules have been approved by the GB and Belgium regulators.

This notice, made in accordance with Article A5.1 of the approved Access Rules serves to bring the Nemo Link Access Rules v4 into effect for capacity delivered from 1st January 2023.

This version of the Access Rules has also been published on the Publication page of the Nemo Link website, together with the current Access Rules effective until 31st December 2022.

As previously communicated, changes included in the new Access Rules are:

  1. Returning to a Loss Adjusted Day Ahead Market Spread (LADAMS) based compensation for curtailments ensuring operation remains within operational security limits before the day-ahead firmness deadline (Article 59.1, Appendix 1 Rules for Forward Capacity Allocation on the GB-Belgian Border); and
  2. Enabling Long Term right returns in months with a planned maintenance period (Article 38.2, Appendix 1 Rules for Forward Capacity Allocation on the GB-Belgian Border); and
  3. Clarifying the treatment of allocated rights when the JAO Participation Agreement has been suspended (Article 71.5, Appendix 1 Rules for Forward Capacity Allocation on the GB-Belgian Border); and
  4. Earlier opening of the Long Term nomination gate brought forward from 16:30 CE(S)T D-2 to 13:30 CE(S)T D-2 (Article 6.1, Appendix 2 Nomination Rules for Long Term Transmission Rights on the GB-Belgian Border); and
  5. Housekeeping changes in light of the revised Harmonised Allocation Rules.

Nemo Link considers that the approved Access Rules will better achieve all relevant access rules objectives provided by the  aforementioned amendments,  particularly with the enhanced financial firmness and by enabling market participants to participate in Long Term auctions with more confidence and  less  risk, as detailed in our consultation proposal for modifying the Access Rules.

If you have any questions or need further information, please don’t hesitate to contact the Nemo Link Customer Team.

Nemo Link’s views on EU CBAM and call to EU legislators

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The aim of the EU Carbon-Border Adjustment Mechanism (CBAM) to prevent carbon leakage is admirable.

However, the detailed legislative proposals currently don’t consider well how electricity is traded in practice. Nemo Link expects that this will most likely lead to a double and/or unnecessary carbon taxation on electricity imported into the EU. Currently carbon-free imports would be even penalized more than electricity originating from thermal power plants.

In particular the CBAM drafting assumes by default that all imports of electricity from Third Countries are originating from fossil power plants. The current legislative drafting also makes it also very hard to consider the actual carbon content for imported electricity. This fails to consider renewable sources of electricity as export drivers and could discourage green electricity imports from outside the EU in the future.

In addition, in order to be eligible for a rebate against CBAM costs, an importer to the EU must provide proof that the goods they are importing have had a specific carbon price paid in the third country. However, this might not work well for one of the key sectors covered by CBAM, electricity, as it is virtually impossible to track the carbon price paid by electricity as most electricity, like an interchangeable commodity, is commonly traded nationally/internationally via anonymous exchange based transactions which makes a direct administrative trail between the producer and importer almost impossible to establish.

Once the EU CBAM is financially introduced, imports of electricity into the EU from third countries are expected to materially decrease, not because they are more carbon intensive than their EU equivalents, but simply due to the increased compliance costs and double and/or unnecessary carbon taxation. This is expected to lead to increased power prices in the EU.

The decreased imports are expected to lead to an increased activation of less efficient power plants in the EU and an increased curtailment of renewable plant output in the Third Countries. Both would lead to an increase in CO2 emissions overall and this will mean that the main aim of the EU’s CBAM is not met.

This type of trade barrier could also negatively impact the further buildout of additional interconnections with Third Countries and negatively impact some of the GB-EU Multi-Purpose Interconnector projects that are currently being considered.

The EU-GB electricity trade is particularly exposed to the unintended consequences of the EU’s CBAM given the level of interconnectivity, the UK’s very ambitious renewable buildout and net zero targets. Currently it was even expected that GB would have become over time a net exporter of electricity towards the EU. Especially in times of high RES output the EU was expected to be importing electricity from GB.

Given the expected impacts we urge EU policy makers to incorporate some changes to the latest CBAM legislative drafting.

Some minor wording changes on Article 9 that deals with the determination of the Carbon price paid in the country of origin would already be very beneficial.

Given the advanced stages of the CBAM negotiations, and to keep open the possibility for further (needed) changes/clarifications, it is important that the proposed review clause (Art.30) is sufficiently broad so as to allow such/clarifications changes to EU CBAM Regulation well-before its targeted financial implementation.

In the presentation prepared by Nemo Link (here) more information can be found on the topic (from a EU-GB perspective) and also some suggested wording changes to the latest legislative CBAM drafting are included.

Nemo Link Access Rules Updates

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Earlier this year, Nemo Link launched a consultation on the latest version of its Access Rules. We are pleased to inform market participants that the modification proposals of the Access Rules have been submitted to the GB and Belgian regulators for their approval.

Many thanks for all the responses we received from the Access Rules consultation. We highly value your feedback and thank you for your time in putting together your comments.

Proposed changes in the consultation

The main changes are driven by customer feedback received in our customer survey, and house-keeping changes resulting from the latest version of the Harmonised Allocation Rules.  These include:

  1. Returning to a Loss Adjusted Day Ahead Market Spread based compensation for curtailments ensuring operation remains within operational security limits before the day-ahead firmness deadline; and
  2. Enabling Long Term right returns in months with a planned maintenance period; and
  3. Clarifying the treatment of allocated rights when the JAO Participation Agreement has been suspended; and
  4. Earlier opening of the Long Term nomination gate brought forward from 16:30 CE(S)T D-2 to 13:30 CE(S)T D-2.

Proposed changes submitted for regulatory approval

The above changes have been submitted to the both regulators Ofgem and CREG. In addition, some minor changes have been made in the Access Rules submission for regulatory approval compared to the consulted documents, namely:

  • Further aligning with the Harmonised Allocation Rules (to reflect 2019 and 2021 HAR changes).
  • Removing the proposed wording from the consultation in article 71.4 (Appendix 1- Rules for Forward Capacity Allocation on the GB-Belgian Border) and instead adding the text from the latest HARs in article 71.5 (with regards to change c: Clarifying the treatment of allocated rights when the JAO Participation Agreement has been suspended).
  • Correction of an error made in the consultation with regards to the closing of the Long Term nomination gate (it should be 8:45 CE(S)T D-1 as it is in our current approved Access Rules instead of 9:00 CE(S)T D-1 as written in the consultation).

Timeline

Subject to regulatory approval, we envisage implementation of the new Access Rules around December 2022. As soon as we receive a decision from the regulators, we will issue a notice for entry into force to the market.

If you have any questions on our proposed Access Rules in the meantime, please don’t hesitate to contact the Nemo Link Customer Team.

Consultation on Proposed GB Use of Congestion Income Methodology

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Article 19(4) of the Retained Electricity Regulation (Regulation (EU) 2019/943 as amended by Regulation 7 and paragraph 18 of Schedule 4 of the Electricity and Gas (Internal Markets and Network Codes) (Amendment etc.) (EU Exit) Regulations 2020 (2020 No. 1006) (the ‘Retained Regulation’) puts a requirement on GB TSOs to propose a methodology outlining conditions for the use of congestion income (UCI) revenues, in accordance with the provisions of that Retained Regulation.

Interested GB TSOs have worked together to draft this proposed GB UCI methodology, which is now published for consultation (in line with the provisions of Article 19). We would like to invite stakeholder feedback on the methodology. Attached here is the proposed methodology and a supporting explanatory document which provides further context.

Please provide your feedback to [email protected] by Tuesday 12 July 2022.

Nemo Link Consults on Access Rules

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Nemo Link today launches a consultation on the latest version of its Access Rules ahead of submission to regulatory authorities for approval.  The consultation mainly covers compensation in the event of curtailment of Long Term rights and house-keeping changes to reflect the latest approved version of the Harmonised Allocation Rules.

Relevant Documents
Please find below the relevant documents which outline the proposed changes:

Consultation Invitation Letter (please read first)

Appendix 1 Rules for Forward Capacity Allocation (track marked)

Appendix 2 Long Term Nomination Rules (track marked)

Appendix 3 Rules for Day Ahead Capacity Allocation (track marked)

Appendix 4 Rules for Intraday Capacity Allocation (track marked)

Timeline
We welcome all market participant and stakeholder comments or questions on the proposals by email to [email protected] by 18:00 CET 31st May 2022.

Contact
If you have any questions, please contact the Customer Team.

Robot Inspects Nemo Link’s HVDC Converter Halls

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Nemo Link, Ross Robotics, Elia Group and Siemens Energy develop robots to inspect live HVDC converter halls

  • The use of robots in high-voltage direct current (HVDC) converter hall inspections will reduce the risks, time and costs associated with manual inspections
  • The development of robots which have electromagnetic compatibility (EMC) will allow inspections without the need to temporarily switch off the interconnector
Robot demonstration at the Nemo Link converter hall. Source: Ross Robotics.

HVDC technology facilitates the large-scale integration of renewables into the system, since it allows the efficient transportation of massive amounts of electricity over very long distances. Nemo Link’s assets include two HVDC converter halls, which, due to their electromagnetic fields, may need to be temporarily switched off for inspection and maintenance purposes.

The four partners are aiming to develop EMC autonomous robots, tailoring the modular platform of a robot developed by Ross Robotics so that it can be used in a converter hall environment. The collaboration will therefore see the creation of a new robot, which is fully compatible with electromagnetic fields and can operate autonomously. It will carry smart sensors and cameras, helping to detect potential issues, reduce the risk of unexpected outages and minimise downtime for ad hoc repair work. Ultimately, this will maximise both the operation time of converter halls and the continuous flow of renewables between Belgium and the UK.

Contact Us

Please get in touch if you would like to explore trading opportunities or discuss any matters related to Nemo Link.

Customer Engagement Partner, Michele Jordan
Correspondence Address Nemo Link Limited, Rue Joseph Stevens 7, 1000 BRUSSELS, Belgium

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