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Post-Brexit market coupling may not happen – Nord Pool

PowerRenewables

22 Mar 2022 12:41

Photo: Shutterstock.com

Photo: Shutterstock.com

London

22 Mar 2022 12:41

(Montel) The establishment of “multi-region loose volume coupling” (MRLVC), linking the UK and Ireland to EU power markets, may not happen at all the longer negotiations take, a director at a European power exchange said.

A key stumbling block around the potential impact of MRLVC on the single day-ahead coupling (SDAC) mechanism linking most EU countries and Norway had arisen, Christoph Grafe, director for market integration at Oslo-based Nord Pool, said on Tuesday. 

Until a resolution was found, progress on the mechanism was likely to remain at an impasse. 
 
“Everything is in a bit of limbo at the moment. It’s very difficult to say when MRLVC might be introduced. The longer the delay, the less likely it may be that MRLVC will ever see the light of day.” 

EU and UK TSOs were tasked to set up market coupling for allocating implicit day-ahead capacity on EU-UK power links by April 2022, in line with the post-Brexit trade and cooperation agreement. 

Missed deadline?
But the deadline is widely expected to be missed, with strained political relations between the EU and UK compounding technical challenges. 

The trade agreement itself expires by the end of June 2026, a looming deadline that is stoking industry pessimism. 

"MRLVC will not be in place from April. [EU bodies] Acer and Entso-E have been against it in its current design because it causes a significant risk to market coupling inside the internal electricity market," said Phil Hewitt, director of energy consultancy EnAppSys.
 
"The commission and UK governments have been involved in discussions but haven't yet fixed the problems, which has put UK and Republic of Ireland consumers at a disadvantage".
 
Since the UK left the bloc, a system of explicit trading has been in place whereby power traders must book physical capacity to trade on EU interconnectors and purchase power separately. 

This has contributed to spiking UK power prices, less efficient trading across interconnectors and diminished interconnector flows. 

Meanwhile, the delicate political climate meant a Norwegian-style model for implicit trading was likely to remain out of the question, Grafe said. 

Norway-UK trade
Power is traded implicitly between Norway and the UK on the new 1.4 GW North Sea Link (NSL) interconnector, given the former’s non-EU status. 

Grafe said that although there was a desire among shareholders to find solutions linking EU and UK markets, which could include replicating the NSL model, they were also reluctant to appear to be working on a new market tool that could replace MRLVC. 

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