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Energy Business Law Insights for the Global Energy Industry

Nord Pool Spot Chosen as First UK Virtual Power Hub

Posted in EU Developments, Power Markets

by Simone Goligorsky

On April 13, 2012, it was announced that Nord Pool Spot (NPS), the Norwegian operator of the day-ahead and intraday energy trading markets, has been chosen to develop and operate the United Kingdom’s first virtual energy hub. The decision was taken following a competitive tender process run by the UK’s National Grid Interconnectors Ltd., the operator of a 2,000MW high voltage direct current link between the UK and France. The aim of the virtual hub is to integrate the UK into the proposed North West Europe (NWE) coupling project, with the ultimate goal of creating a single European market by 2014.

According to a statement released by NPS, the new hub is due to facilitate the pooling of GB liquidity. As the market currently operates, each power exchange may have different prices. However, it is envisaged that the creation of the hub will allow for the formation of a common, more robust, reference price for electricity across all participating UK power exchanges by the end of 2012.

Currently, the UK is the only country involved in the NWE market that allows for multiple power exchanges and interconnector operators to participate in the market. The launch of the new hub is designed to assist access to the numerous power exchanges, as well as establishing one electricity price for the UK. Market participants will continue to maintain their existing contractual relationships with their power exchanges, with the virtual hub being designed to ease inter-exchange transactions and arrange interconnector flows with interconnector operators. 

The NPS statement went on to state that their experience in market coupling has already allowed for the successful integration in the Nordic countries, and Estonia, with NPS currently working with the Polish power exchanges to establish price coupling between the Nordic markets and Poland. Under the NWE umbrella, NPS is aiming to deliver market coupling and capacity allocation into the UK, the Central Western Europe region and the Nordic areas. 

The announcement regarding NPS comes a month after further steps were taken to create a third electricity interconnector between the UK and mainland Europe, this latest interconnector being a joint project between the National Grid and the Belgian transmission operator Elia. The project involves putting in place an interconnector between Kent in South East England, and Belgium.