Great Britain net exported over 8 TWh of electricity to EU markets over the summer, but flows are forecast to reverse over the coming weeks as a possible tug of war develops over scarce output, analysts at S&P Global Commodity Insights said in a report Oct. 20. GB, traditionally a net importer of power from the Continent on its 4 GW of interconnection, saw NBP gas prices fall to a steep discount to Europe's TTF gas price benchmark over the summer. The NBP-TTF MA discount averaged Eur90.74/MWh in the third quarter, S&P Global pricing data show. In addition, record-low French nuclear output saw French power prices swing to a premium over UK power. "While we expect GB to be able to pull on EU power imports from December, we acknowledge the potentially extreme upside price risk in the event that Britain needs to play tug of war for power with its neighbors," said Glenn Rickson, head of European power analysis at S&P Global. "This is particularly the case as National Grid has said that it regards Demand Control actions as a last resort even if they are cheaper than interconnector buy back actions," Rickson said. During the summer, National Grid ESO took a GBP9,725/MWh interconnector buyback action on the Nemo link to Belgium. The value of lost load in the UK is set at GBP6,000/MWh.
Exports in October
UK net exports to France have continued into October, while flows on interconnectors to the Netherlands and Belgium (1 GW each) have been more bi-directional. Thereafter, S&P Global forecasts net UK exports of 0.1 GW in November, including 1.2 GW flows to France. December, which will see a return to full capacity on the 2-GW IFA-1 interconnector after a fire in September 2021, could see UK net imports average 5.6 GW. That would balance 2022 UK power imports and exports at zero compared to 25 TWh of net imports in 2021. For December to March, S&P Global forecasts net imports into GB to average at a record 5.6 GW before slightly easing next summer. The biggest variable beyond the weather is French nuclear availability, with less than half of France's 56 reactors currently in the market. As such, UK imports from the Continent depend heavily on operator EDF's success in returning some 20 reactors by early next year.
Gas spreads
Gas market spreads signal that the NBP will go from discount in November to premium in Q1 2023. There are risks to this view, with S&P Global forecasting NBP close to parity or at a small discount to TTF in Q1 and the UK to remain a net exporter of gas to the EU this winter. "This winter may see the impact of the UK's exit from the European Union in 2020 play out in energy market terms for the first time," S&P Global's Rickson said. In the context of the EU's recent debate on a possible gas-for-power price cap, German Chancellor Olaf Scholz and EC President Ursula von der Leyen both said the financial impacts of a flow of subsidized electricity to non-EU neighbors needed to be analyzed. Iberia's existing gas-for-power price cap has a border adjustment mechanism, allowing borders to remain open and mutually beneficial energy flows to continue.