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SEM Chart of the Week

2020

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Go with the flow: Estimating Celtic Interconnector use

Michael Brown
Michael Brown

Last week, Taoiseach Leo Varadkar and French President Emmanuel Macron signed a letter affirming plans to build a new 700MW Celtic Interconnector.

With the increasing penetration of renewable generation across Europe, discussion of the viability and benefits of interconnectors is also rising. In Ireland, just one interconnector is currently in operation (excluding north-south tie lines): the East West interconnector (EWIC) to the GB market. There are two further interconnectors with Project of Common Interest (PCI) status: the Greenlink Interconnector to GB, and a link further afield to France – the Celtic Interconnector.

This week’s SEM Chart of the Week considers the likely flows between Ireland and France over that interconnector.

Gravity driven

The interconnector will link Ireland directly with EU energy markets, running from East Cork to Brittany in north west France. Set to complete in 2026 and costing €930mn, 65% of the project’s total costs are due to be paid by Ireland and 35% by France, reflecting the expected share of benefits between the two countries. The project is currently at the consultation phase, with an eight week opportunity for stakeholders and communities to comment on the shortlist of landfall and converter stations due to close on 10 June.

The project was awarded €4mn in funding from the European Commission on 28 June 2017. As a Project of Common Interest, it could receive a grant covering up to 60% of the expected costs. EirGrid and its French equivalent Réseau de Transport d’Electricité are submitting a request for funding for the interconnector under the Commission’s 2019 Connecting Europe Facility Energy Programme.

Flowing downstream

Our chart shows the differential between Ireland and France day-ahead baseload wholesale power prices across all weekdays between 1 June 2018 and 30 May 2019. Positive figures reflect power being cheaper in France, and negative figures show power being cheaper in Ireland.

Assuming that the difference in day-ahead prices set the flows over the interconnector, our high-level analysis shows that, of the 240 weekdays examined, if the Celtic Interconnector was in operation, power would have flowed from France to Ireland for 200 days. This is compared to flow in the other direction, from Ireland to France, which would have occurred for 40 days.

Against the current

Although a clear bias in flow from France to Ireland, there were periods where flow from Ireland to France was more likely, with flow of power in this direction mostly occurring in the winter months of November and December. Flows will be more complex than this simple model suggests with available capacity playing an important role e.g. the Moyle Interconnector from Northern Ireland to Scotland has been subject to an export limit.

However, once the Celtic Interconnector is in place we do expect power to mostly flow to the Irish market. We are developing this initial analysis more in our pan-European power model, which examines future electricity generation, consumption and power flows on a 20-year time horizon.

Change in tide

The above analysis does exclude the impact of future renewables growth in Ireland which may increasingly push down prices through price cannibalisation and contribute to volatility. There has been some evidence of these effects already in SEM prices.

This is in comparison to France which hosts a large nuclear fleet supplying a reliable and predictable flow of energy. This interconnector could help prop up prices during high wind output periods, while depressing price spikes when the wind is not blowing.

France is planning to reduce the size of its nuclear portfolio by 50% by 2030, with an associated reduction in generation predictability and volumes. At the same time, Ireland will continue to develop its renewable portfolio. A link between the two markets may become increasingly important.

For more information on the growth and development of renewables in Ireland, our training course Green Island: investing in renewables will be held at the end of the month. Contact Richard Wetherall at training@cornwall-insight.com for more information.

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