Britain needs to relink its electricity market with the European Union to improve the trading efficiency of its growing fleet of massive subsea power cables to Continental Europe, according to the head of National Grid PLC's interconnectors business.

Since Brexit, electricity is no longer traded through the EU market-coupling regime, resulting in varying arrangements for allocating interconnector capacity.

Cross-border trading is now "far less automated and far more cumbersome ... than it used to be," Rebecca Sedler, managing director of interconnectors at National Grid Ventures Ltd., told S&P Global Commodity Insights.

National Grid operates six high-voltage direct-current cables to Europe: two to France and one each to the Netherlands, Belgium, Norway and Denmark. The newest asset, the 1.4-GW Viking Link to Denmark, was commissioned in December 2023.

"We're connected [to Europe] through grids, through telecoms, through pipelines, but [also] through markets and policy, and unfortunately since Brexit we are at risk of veering further and further away," Sedler said March 21 on the sidelines of WindEurope's annual conference in Bilbao, Spain.

"[We] can build physical connections and physical infrastructure but if it's not optimized properly by the right market signals then it's less than efficient for consumers on both sides," Sedler said.

Heightened cooperation between Britain and Europe on issues like energy trading could lower energy costs by £1.1 billion per year, lobby group Energy UK said in 2023, noting the "mismatch of different trading arrangements" put in place since Brexit.

The EU-UK Trade and Cooperation Agreement of 2021 had proposed the introduction of multi-region loose volume coupling (MRLVC), where electricity and cross-border interconnector capacity are auctioned together on a day-ahead basis.

MRLVC was meant to be in place by April 2022 but is yet to be finalized. The UK Department for Energy Security and Net-Zero, which did not respond to a request for comment, last year concluded a consultation on proposals to support efficient cross-border trading.

Sedler said MRLVC is "probably not a legitimate, viable solution." Instead, Britain rejoining the EU's single-market coupling system would offer "convenience and efficiency to all traders again," the executive added.

Next generation of power cables

Sedler said cross-border interconnectors have grown in importance as a source of flexibility since Europe's energy crisis.

Several British power cables have flipped their typical direction of flow in recent times, turning into exporters during France's nuclear shortages or when Norway experienced droughts that hit its massive hydropower fleet.

"Winter [in 2022] showed that yes, we may not be part of the European Union anymore, [but] we're certainly part of the ever-connected European energy system and actually our assets, particularly interconnectors, are extremely valuable to those electricity systems when they're under duress," Sedler said.

That view underpins National Grid's plan to move beyond point-to-point interconnectors toward a new generation of multipurpose power cables known as offshore hybrid assets (OHAs).

That includes the 1.8-GW LionLink project, linking Dutch offshore wind farms to the Dutch and British markets, which is earmarked for operation in the early 2030s.

While developing the technical plans for LionLink, National Grid and its Dutch partner TenneT Holding BV are also co-creating the regulation behind the project.

"The overall infrastructure is far less than if you were to build it all independently but then somehow you've got to share the money out … to the right people," Sedler said, pointing to the added layer of complexity because of the offshore wind connections.

Key questions include how the wind farms are remunerated if they are constrained by the interconnector, whether the UK's cap-and-floor regime is appropriate for OHAs, and more fundamentally, which direction the power will predominantly flow.

Both the UK and the Netherlands have big plans in offshore wind, with the UK aiming to reach 50 GW by 2030 and the Dutch targeting 21 GW.

"Which country is going to be the exporting country, where the wind's going to blow, is much more complex than a point-to-point interconnector where you just go, '50/50 cost, 50/50 revenue, everyone's happy,'" Sedler said.