The idea behind national capacity markets is to pay power producers to ensure that enough electricity is always available, also when production would otherwise have been too low to cover demand. Some countries are considering introducing such markets as a result of an increasing share of the power consumption being covered by intermittent renewable energy sources such as wind and sun – production that depends on favourable weather conditions. This means that there is a need to make sure that there is enough power when the wind is not blowing and the sun is not shining. One solution is to pay to ensure other power production is available when required.
Power from Norway may be given access
An important issue as regards capacity markets is whether international interconnectors that contribute power should be included. If such markets are introduced and international interconnectors are excluded, it could mean that NORD.LINK, the planned cable between Norway and Germany, becomes less profitable. This is therefore an important issue for Statnett and its project partners in their planning.
"We see that the German authorities have not reached a conclusion on whether to introduce capacity markets and how they should be designed, and we may not have a decision before we make our investment decision in 2014. We have therefore asked for reassurances that the cable will be given access to the capacity market, if introduced," says Executive Vice President Gunnar Løvas.
And the German authorities have now replied. In a letter to Statnett's CEO Auke Lont, State Secretary Stefan Kapferer of the Federal Ministry of Economics and Technology in Germany writes that they will do their utmost to ensure that the interests of all international interconnectors are taken into account in a due and fair way when making decisions on this subject.
"We are satisfied with German authorities, through their letter, recognising that this is an issue of great importance for the profitability of the cable project, and we are pleased that Kapferer goes far in assuring that NORD.LINK's interests will be safeguarded in the future market design. It is only natural that the content of this letter will be included in the authorities' consideration when processing the licence application."
Discussions with the British
Statnett also plans to build a cable to the UK in cooperation with the British company National Grid. The UK has made a decision to introduce a capacity market, and they are now assessing specific concepts that will enable the cable between Norway and the UK to participate in the long term. Agreement has been reached for a collaboration between the project and the Department of Energy and Climate Change (DECC), with the intention of finding an acceptable solution by the end of 2013.
"We have a constructive dialogue with the authorities also in the UK, and trust we will find an acceptable solution. Having said that, I would like to add that Statnett considers the introduction of national capacity markets as an unfortunate development which can make it harder to achieve a more integrated European power market," concludes Executive Vice President Gunnar Løvås.
The NORD.LINK cable will be owned by Statnett and German grid operator TenneT, along with the German state owned investment bank KfW. The investment decision is scheduled for 2014 and the cable is scheduled to start transmitting power in 2018.
The NSN cable will be owned by Statnett and National Grid, the investment decision is scheduled for 2014 and the completion is scheduled to take place no within 2020.