The impact of interconnectors on the GB electricity sector and European carbon emissions

Abstract

A model of the European electricity system is used to analyse the impact of increasing interconnection levels between Great Britain and its European neighbours. Scenarios are assessed for 2020, 2025 and 2030. Several policy questions are highlighted around the assessment criteria for approving interconnector projects and the viability of existing investment and remuneration models. Results show that a GB specific carbon tax in 2020 contributes to a relatively high cost of energy and therefore high imports into GB. Increasing GB interconnection capacity in 2020 from 5 GW to 8.4 GW facilitates additional imports and brings down the annual cost of electricity for GB consumers by €639m. Analysis for 2025 and 2030 shows that additional interconnectors, the removal of the additional GB carbon tax and changes to the generation background lead to GB experiencing increased interconnector exports and reduced interconnector utilisation. This lessens or reverses the impact of new GB interconnection on GB consumer prices. It also leads to a significant reduction in revenue potential for future interconnectors. Carbon emission analysis indicates that inconsistencies in carbon pricing across different countries, like the extra GB price support, can lead to perverse outcomes with reduced GB emissions but increased total European emissions.