Interconnection

We model interconnection on GB prices by first modeling European power prices and forecasting the capacity of interconnectors

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Check out the future capacity of interconnectors

We then work out the dispatch, which can change prices across each side of the interconnector, by modeling flows in each direction.

The area labeled the 'Rest of Europe' is heavily interconnected

The Netherlands, Belgium, Denmark, and Germany will often have the same, or similar, power price as they have many GW of interconnection. To simplify the model, we treat them as one.

Modelling wholesale power prices in neighboring countries

We model prices in Europe in much the same way as we model GB prices. We look at a capacity stack (which is given by the FES) along with short-run marginal costs of generation and renewable intermittency (using the same wind year as a seed) and model demand. Thus, we model prices across each of the interconnected geographies.

Each of the interconnectors is added to the supply stack, and the marginal plant is re-calculated

Interconnectors act to increase demand or increase generation:

• Increase demand if they are export power from the UK to the country - this happens when prices in the UK are lower than in that country
• Increase generation if they import power from the country to the UK - when the price in that country is lower than the UK

See the addition of interconnectors (pale yellow boxes) into the supply stack

With no interconnectors (top), the price clears at £112.69/MWh on 2028/03/24 at 6 pm.

With interconnectors, the demand is higher (as we export to the Rest of Europe), but the price is lower (as we import cheaper power from France, Ireland and Norway) - now clearing at £102.04/MWh.

The resulting final wholesale price curve shows a reasonable loss of load and price spread

Compared to the GB only prices we see lower spreads, as anticipated.

And so we have a projection of the wholesale power price.