IPPToday #164: Funding announced for 1.4 GW Germany-UK transmission project
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A consortium comprising Meridiam, Allianz Capital Partners, on behalf of Allianz Group, and Kansai Electric Power have announced that they will fund NeuConnect Britain Ltd, a newly set up operating company, which will build the first direct power link between Germany and the UK.
The company plans to construct two submarine 500 kV HVDC-cables totalling approximately 670 km and a capacity of 1,400 MW to flow between the two countries. The investment for the project is forecast to be EUR1.6 billion (US$1.97 billion).
Germany’s Federal Cartel Office (Bundeskartellamt) already approved the funding of NeuConnect Britain Ltd. The consortium currently expects a Final Investment Decision for 2020 which will be subject to the successful further development of the project, in particular with respect to a satisfactory outcome on the applicable legal and regulatory frameworks in both Germany and the UK.
Being the first connection between two major markets, NeuConnect will create new export and import routes for electricity for each market. The interconnector is also intended to reduce power grid bottlenecks in Germany.
Presently numerous wind turbines have to be powered down frequently because the electricity they produce cannot always be fed into the grid resulting in un-used renewable energy and high congestion costs. In future it will be possible to export the surplus wind energy through the interconnector. Thus the costs for curtailing surplus power will fall, benefiting German consumers and also benefiting UK from reduced wholesale and consumer electricity prices.
In addition to the above, higher use of the wind turbines has environmental benefits by increasing the utilisation of renewable energy. A recent cost-benefit analysis by the independent consulting firm Baringa shows an economic welfare gain for Germany of around EUR100 million (US$123.1 million) annually between 2023 and 2047.
At the same time, the interconnector improves the diversification and increases the security of supply in the European power grid. Britain, which currently relies on electricity imports, is driving forward the construction of interconnectors. For the country, NeuConnect means an additional power source and higher security of supply.
Germany also benefits because the difference in electricity demand between the two countries is greater than the difference to their respective neighbouring countries. Partly due to the time difference, simultaneous demand peaks occur less frequently, meaning generation capacities from Germany and Great Britain can be shared more efficiently in cases of power shortages.
The NeuConnect interconnector is part of the Ten Year Network Development Plan 2018 (TYNDP) of the Association of European Transmission System Operators (ENTSO-E). NeuConnect received initial approval from Ofgem, UK’s energy regulator, in early January 2018. NeuConnect is the only German-British project currently authorised to participate in the British cap and floor scheme.
NeuConnect is being developed as a ‘stand-alone’ interconnector project by a consortium of experienced infrastructure investors and operators. Besides Meridiam (equity share 53.5%), Allianz Capital Partners on behalf of Allianz Group (26.2%) and Kansai Electric Power (18.3%), the project is also supported by Greenage Power and Frontier Power as developers.