Sharing Power Across Borders: The Role of Interconnectors with Rebecca Sedler (National Grid)

Hello, and welcome to transmission. Today, we're joined by Rebecca Sadler, is the managing director of National Grid Interconnectors, and we are talking all about interconnection. From the gigawatts of cables already in place to the future of the market, we cover how it technically operates, but also some detail on the commercial rules that guide these systems. Critically, how do they work for consumers, and do consumers see the benefits of interconnection in their bills?

Finally, should we build more interconnection or are they disrupting markets? Let's jump in.

Hello, Rebecca, and welcome to transmission.

Hi, Ed. Thanks for having me here.

And as always, let's get started off with who are you and what is your role?

So I am the managing director of interconnectors at National Grid. So my name is Rebecca Sadler. I've been enrolled for about two and a half years now, and the interconnectors business at National Grid owns and operates six subsea HVDC assets. We'll try and keep away from Racknerons during the conversation, I can, I realize I've already done it, connecting the UK grid to five different countries, so France, Netherlands, Belgium, Norway and most recently Denmark? I'm also responsible for setting the vision for the business, developing all the new projects and we'll talk a bit more about those hopefully.

Okay. And let's focus on the the real basics of this. So so what is an interconnector?

An interconnector is part of our high voltage network.

Apart from it's not domestic, it connects the UK to other countries and so far, interconnectors have connected the UK to other European countries, so the ones I just mentioned, plus there are independent developers that have connected the UK to Ireland, Northern Ireland. And there's one on the way to Germany. So, they are cable that runs subsea, they're buried underneath the seabed and when they land on shore, they have to connected to something called a converter station and that's essentially to convert the power so it's suitable to flow into our AC grid, our normal high voltage grid, which can then be distributed to households and businesses across the country.

But what's I think especially unique about interconnectors is one, they flow very large loads, so the smallest one in our fleet is a gigawatt, that's enough to power nearly eight hundred thousand homes, I would say in the UK. The largest two gigawatts, so that's IFA, the oldest interconnector we have to France, and they're incredibly flexible. They can literally flex direction from one country to another in minutes, if not seconds.

So, the whole purpose of this connection to different energy systems across Europe is to enable countries that have high energy prices to import from countries with lower energy prices. And of course, those prices, as you know, are set by the scarcity of of the energy systems and the many different variables that go into that.

So, what we have in the UK are interconnectors that allow us to plug in to different energy sources, that allow us to import when our prices are high, but also to export when we have very low prices or even negative prices. And they also provide system operators on both sides of the link, the opportunity to use these highly flexible assets at times where the systems may may need that flexibility to provide wider grid services.

Okay. So if we turn that into like a real world example, we might say it's really sunny in the UK and it's not sunny at all in continent, then we might be flowing energy from the UK to continent and that's kind of balancing those networks. And then let's say we have a problem in GB, so for whatever reason a large part of our generation mix is goes missing suddenly. Let's say a nuclear plant trips. We then the the TSO who are responsible for managing the the transmission system then say, actually, no. We'd rather not have that flowing in that direction. We're gonna flip this back the other way and we're gonna rely on France, Denmark, etcetera.

Yeah. So you you you're you're precisely right. So, I mean, you could have a look at this from big long term trends. So for example, are we gonna achieve the renewables build out that we're hoping to to do so in the UK, and in the twenty thirties we have loads of low low cost cheap wind that we'll be able to export to European countries in that decade and onwards through to intraday. Does the UK have breakfast and therefore morning peak at the same time as France? Does it have its dinner at the same time as the scarcity and of course, all the things affecting that scarcity like weather patterns, heating, cloud cover, etcetera.

What do they mean? And quite often on our links, what we see is that there are import exporting in the same day. I mean, the circuit breakers and the converter stations work very hard to stop the flow, reverse the flow. I was actually looking this morning before I sat down on what we're importing into the UK today and sixteen percent as we speak of energy consumed in the UK is coming in via interconnectors. So and you can see it's a nice warm sunny day here at least in London. Not quite as warm as it's been.

But that could easily reverse to a much smaller or even increase in the hours to come. They are highly flexible assets.

And I and I really like how you've kind of so the example I gave was a generation example. So, you know, generation is a bit variable and all of a sudden interconnectors can do different things. Your example was the other side of that, which is the demand side.

Yeah.

And you're essentially saying, well, actually, because of the time difference and because the nations have different cultures and standards of how they how they where when they eat their breakfast, when they eat their dinner, you can then there's a natural naturally a different shape even for markets that are quite close to each other. And so even if you don't get generation volatility, the demand volatility creates shape and creates this this need or this opportunity to connect them.

Yeah. I mean, what's really interesting is when people talk about interconnectors and they talk about, okay, the Norwegian interconnector, UK must all be about hydro or the France interconnector must all be about nuclear, whereas it's never one specific thing that sets the price in the country. Obviously, there can be very extreme events that mean that you know, that like for example in twenty twenty two during the Q4, during the winter in France, was significant nuclear outages that set the price very high, know, but there's a whole load of things as you say, consumer behavior, weather patterns, what's happening across the rest of the borders with their inter because all these countries are interconnected to loads of other countries that have completely different energy systems as well. So it's a little bit more complex than just picking like a dominant a dominant generation feature or particular weather pattern.

If we're better to find countries that are different to us, should we try and find countries that are sort of really far away either sort of east west or north south? Why why don't we sort of have a massive interconnection that goes, say, spanning Europe?

Well, I mean National Grid owns and operates the longest interconnector in the world, which is the Viking Link, which connects us to Denmark, is about seven hundred and fifty kilometers long.

And clearly, you know, we are looking at longer and longer projects and we hear about those in the energy press. I think there's a huge amount of benefits to be gained from very uncorrelated energy systems. But of course, there's a cost to that as well. There's the cable, which costs a lot of money per meter, laying the cable is a huge effort. And, know, just just the the size of the construction effort, the the tenure of that from project development to construction to operations, you know, you'll be having to plug in a lot of CapEx before you start operating the asset and seeing the benefits.

Okay. And then you mentioned the cost of it, but then there's also I suppose the cost of actually operation for a really long cable. So as they get longer and longer, do you lose more energy in that cable?

There are losses with the longer and and and deeper, technology is evolving all the time. It really is. And with the cable technology is evolving, the ways of laying the cable, the ways of maintaining them, keeping them secure. So that wouldn't be a predominant feature in the economics, it would actually more be the raw materials, the manufacturing of those raw materials, the production processes, the testing process to produce the cable and then build the converter station and plug the whole thing up that would consume a lot of the CapEx.

Okay. So really kind of CapEx heavy and the sort of losses aren't the most kind of important part of the business case. You've just articulated a little bit at at a prop that you've brought along and this is a bit of a transmission first. I'm not sure we've ever had a prop on on on transmission yet.

It is for lots of people an an audio experience, but we will do our best to describe the prop that you've brought. And for anyone on on video, then you're in for a treat. So Rebecca, would you like to describe what you've brought along?

Okay. So I have bought a section of subsea cable for you today, Ed. So it's actually a small cutting from the iFA two cable. IFA two is the second interconnector that we we built to France.

It's about, I don't know, five centimeters high would you say, maybe a bit longer and about the width of the diameter of a pen. Okay. And what you'll see, and we have two of these cables running from our converter station in Ports Smith to Torb in France running underneath the channel.

And I brought it in because I think it's really interesting first to pick it up and see how dense it is, like a meter of one of these cables can weigh between forty and fifty kilos, right? So just think about what it takes to lay hundreds of kilometers of it, what kind of vessel it takes, the kind of effort it takes. But also you can see the many different layers when you cut open the cable. So the copper core is actually a minority aspect, isn't it? Because then it's surrounded by different insulation.

Feels like the copper portion of it is like thirty percent of it maybe.

I know and it's just amazing. I just find it a wonder to look at this and think out of that copper core, that cable, we transmit five hundred megawatts subsea from the France to UK. I just find it, you know, an engineering feat.

And so the the the inside portion, the copper portion, that's where the transmission is happening. Yeah. Everything else on here is all around insulation and protection.

Exactly. Okay. That's that's exactly right. And, you know, so the density of it, and this don't ask me to explain why we have one, two, three, four, five, six, seven, eight, you know, multiple layers, what they all do.

But I can What I can tell you from working with our partners, this is a curve prismium cable who are a huge vessel owner operator, cable manufacturer, but key partner for National Grid. You know, the the upstream aspects to producing this cable is incredibly complex and expert an expert and fascinating.

Mhmm.

Really fascinating.

And you said this is from I for two? Mhmm. So is is I for two just one of these across the Two of these cables. Two of these cables. Okay. And then they sort of sit side by side or are they they split? How does that work?

They'll be close to each other, but they will be laid separately.

Okay. Super interesting. And we we were also I think I I know a little bit about this, but I'm really interested to think about or to talk about how do you actually make this?

Yeah. I mean, yeah. So I'm I'm not gonna profess to be an expert on how you mean, how you make it. All I can tell you is huge factories, generations of workers who are highly highly trained and skilled in in being able to be part of any part of the process of producing this and huge amounts of testing, huge amounts of testing before it's able to be released into projects.

So the, if any section of this gets contaminated and it gets put onto hundreds of kilometers, can you imagine the devastating impact? Exactly. But also the laying process which is in this case done by the cable manufacturer is just fascinating, know, these huge boats that look like, I don't know if you've been on cruise, they look like a Caribbean cruise boat, but they've got these things that look like moon buggies that are out of the old James Bond film that they deploy subsea, you know, hundreds of of meters to the sea that dig the trenches that and then the cable can uncoil them, they can blow the the the the sand or whatever the the the seabed is made out of to try and cover it and pat it down.

It's just a fascinating process.

And it's just this fascinating thing where essentially the one thing you kind of can't do with one of these is you can't sort of break it or kink it.

So the the the vessels have to be enormous to be able to Exactly.

Get sort of wide enough coils onto the vessels.

That's it. I mean, they look like you know, like a like a what you would put a needle, a bobbin, a needle and thread, know, like a like a big big turnstile, but it's huge and you have to make sure that the diameter that the angles are such that the cable isn't over bent or damaged in any way and laid really precisely, but it's it's just it's huge.

Okay. Let let's let's come back to something you mentioned earlier. So you mentioned that there were sort of these landing points, these control rooms for interconnectors. What what do those what do those control rooms do?

So the control rooms operate twenty four seven to monitor, maintain, and ensure the safe operations of the interconnectors, but also to be the point of call for the NISO control room because of these are of course critical national infrastructure, they're incredibly flexible, they don't just operate according to markets, they operate according to our system operator instructions. And also, they need to be talking to the control room at the other side of the interconnector at all times, right? So we have control rooms based on-site, we also have some based at other locations.

But actually, if you're thinking nominating the flows on these interconnectors, people are pressing buttons and I don't know, pulling levers and to kind of manage it, that's not the case. The assets are operated by what we call control protection systems are largely automated and they're automated according to where customers nominating their capacity and those nominations, as you can imagine, follow what the market price is determining, right, up to you know day ahead and intraday.

Yeah. So when you say nominating capacity, that's essentially somebody has seen an opportunity to flow energy let's say from England to France and they will say, right, actually I have this capacity that I've bought. I now want to nominate to flow energy through it.

Exactly.

And that would maybe be the first stage. But the second stage be that closer to delivery, the system operator would sort of get a last look at that and have a potential to intervene?

Well, the customers will nominate their capacity. If the if the system operator So before you go operational with an asset like an like an interconnector, you of course need to, you know, ensure that you're compliant with grid codes, you need to also have an operating protocol agreement with both with the SOs and with TOs, the transmission, the SA owners, so National Grid and in IFA's case RTE. And part of that will be the ways in which the system operator can use the asset if you like for grid services. So things like emergency instruction, emergency assistance should you need to.

And we do see times where the system operator will kind of buy the customer nominations out or buy consumers out of the nominations and choose to flow the interconnect to potentially another way. Just to be really clear, National Grid never flows energy on the interconnector. We are asset operators, we maintain the safe, secure, reliable asset for market traders and different utilities and consumers to buy and nominate that capacity. And of course, for the system operator, NESA or RTE in this case to use it, but National Grid would never flow energy.

Yeah. So the just within this, I know there's if you've worked in energy for quite some time, maybe things like National Grid will feel like it's an all encompassing thing. But really here, mean National Grid, the thing that owns the assets. Exactly. And NISO being the thing that has the control room. Yeah. And so the asset ownership and the dispatch of it are very, very different things.

Yes. It will be dispatched by our control room, so the national grid control room, but the system operator can send an instruction to our control room as to how they want to dispatch if that isn't in line with just the nominations that have been put on the different interconnectors.

Okay. And and just to you can see now, I think, hopefully, how interconnectors are helping grids manage problems that they have. What happens if an interconnector has a problem? So what happens if somebody has dropped an anchor in a storm and that cuts through one of these cables, which is hard to imagine because it looks incredibly robust, but it is possible. What happens next?

First of all, it's it's it's worth pointing out as you say, they are incredibly robust. They are buried underneath the seabed.

And you know, we do the control rooms, one of their many responsibilities is also monitoring vessel activity around detectable by the systems that they have, monitoring systems that they have and we can see, we literally have screens that show exactly what boats are going near our cables, how long they're near our cables, if something's heading towards them. So that's a key part of the interconnector control room. But you're right when you say anchor, mean when I thought, when I came into this job and I was like, okay, they might drop an anchor by accident, I was thinking about something maybe the size of this table was peaking at.

Actually some of these anchors are the size of this room that we're in, right? So they could damage. And thankfully, we've not had any kind of anchor drop episode since I've been in Interconnectors. But I think the understanding and deterring vessels away from your assets with the help of other agencies such as the coast guard is really, really important.

But also having the ecosystem of support with your supply chain and your preparedness plans in place just in case something like that does happen, right?

Because if there was some kind of an anchor strike that we hadn't detected, let's say we weren't able to monitor, there could be a load of vessels out and we don't know precisely which one, we have to first detect where that strike has taken place.

We have to understand if there's, know, whether it's a go in, get get the permission to go in and send a vessel ourselves to go and look at the damage, so that means sometimes recovering the cable from the seabed, which will mean the opposite of what I've just described in terms of laying the cable, you have to do exactly the same to to expose the cable and examine it.

You'll then have to cut a section of the cable Okay.

And get a new piece of cable to then join and rebury it. That's essentially the process you need to go go through, But that means having the support of cable repair vessels, that means having the permits so you can get out in the sea, that means having spare cable, which of course we have for all our assets, that means having availability and the conditions to do so. So, a lot easier to do this in June than it is in January, right? In the course.

All those things. So, preparedness is a huge theme for us and essentially underpins our resilience. And so that can mean not just having kind of business prepared plans that you can operate to, but the supply chain with the right services and the right contacts that we can act at pace.

I one of the things I love about the energy industry is sort of the engineering ingenuity that goes on and and kind of having ready questions to how do you repair an interconnection that is broken, but is at the bottom of the ocean is an exact exactly a great example of just how complicated, but actually if you break these things down and you kind of have these right processes in place, hey, you can you can manage that.

Yeah. And I think the seabed conditions and the, you know, and and the depth of the water, of course.

I mean, we are blessed in the UK with the North Sea coastal conditions that are shallow and soft, but if I think about where we connect into in Norway for example, and it kind of comes in to a place called Kevildau in Norway, is actually really up a mountain right next to a big, very big hydro station and kind of on the edge of a fjord Mhmm.

That pretty much drops to eight hundred meters, less than, you know, a hundred meters offshore. So very and it's it's completely rocky, it's it's very very different seabed conditions.

And it tracks the seabed all the way? Yeah. Yeah, through all of that? Okay.

And then, yeah, you have to drill through mountains and stuff then to get it to the converter. So all all everyone assumes that, you know, it's it's most tricky to fix subsea if there is a if there is an issue, which is probably right, but it's very tricky as well sometimes and and it takes a huge amount of expertise to do the onshore because for all different kinds of reasons, the the geology could be complex, It could also be congested area.

Yeah. Okay. And and let's let's move on from the technical side to the to the commercial. So you mentioned that you have six interconnectors that you that you oversee. How how many gigawatts is that?

So seven point eight.

Seven point eight gigawatts. Okay. And what does that look like in the future?

So we are already developing our next project, which is LionLink, which is a one point eight offshore hybrid asset.

So slightly different to a point to point interconnector, which I've described before. So is LineLink will be an offshore hybrid asset connecting the UK to the Netherlands, has an in service date of two thousand thirty two, but it will also pick up Dutch wind along the way. So it will be the first interconnector that can not just export and import energy from another European energy system, but it can also import wind energy directly from a European offshore wind farm. So that's super exciting for us.

So it's kind of stopping at a wind farm on the way, is that right? And is that a physical island or is that a sort of a platform?

That's a platform. So it's part of Tenetz who are the Netherlands transmission system owner. They have something called a two gigawatt program where they're doing a huge build out of wind across the North Sea coast and they're connecting it via a series of platforms. We'll be connecting to the third of those platforms.

So yeah, that project is well underway and we're very excited that because we do believe there's huge scope for coordination with different offshore technologies, course offshore wind, but maybe in future years other things in the North Sea. So finding innovative ways for us to connect transmission and generation and bring it onshore in a coordinated way, which lessens the burden on communities and which saves on infrastructure of you know, raw materials. All the different services I just talked about with constructing and operating the asset, we think is a can be hugely beneficial to consumers.

Okay. And we have you you mentioned this new asset coming online by twenty thirty two.

Just just in in broad terms then, are are we thinking the the portfolio of interconnection will double or triple from there, or do we think it will be more of a sort of by the time it gets to twenty thirty five, we'll see an incremental increase in size.

We have also and other projects in the we've got a quite healthy pipeline, and we we have other projects that are similar scale to to LineLink as well. I guess that we we So, in the UK, we were working to a policy target of eighteen gigawatts interconnection in the UK that was set in the white paper about four years ago that came out with the last energy bill, the one before the recent one.

But it's clear that by two thousand and thirty, we're not going to have developed that much interconnection in the UK. Think overall there's going to be about twelve maybe by two thousand thirty, twelve gigawatts, so that's obviously falling short of the eighteen gigawatts.

What we believe though that we need to set firm policy target that we can work to for this independent in CP thirty and beyond and has a coordinated network plan as well.

And that we we are working to twenty thirty five for for National Grid. We believe that we could add a significant amount of volume to our interconnections with other European partners, all having very strong consumer cases.

Okay. And Clean Power twenty thirty being the plan that's in place for the power system in twenty thirty. You mentioned that LionLink was gonna go live in twenty thirty two. Just to give people an idea of how long have you been thinking about LionLink, is is this something that was sort of imagined last year, or has this been running for many years?

No. It's been running for at least about, I'd say three and a half years now with the Netherlands. And it has also gone through different designs and looked at different landing points, different engineering development. But we're now moving forward at pace. We now have a or supported by regulatory deal which underpins the investment. We have the we're pretty well progressed with that.

Okay. And so it's around ten years ish sort of start to finish to get one of these puts put together.

But yeah, but I must point out that LionLink is more complicated than our point to point because of the fact that we're hooking up into the platform, we're connecting offshore wind, so it's much more multi party coordination, which is always a bit more complex, and it's first of kind. First of kind like technically and also from a sort of market and regulatory framework. So, we had a pilot regulatory deal to enable us to do LineLinks, almost like a sandbox project. So it was great to see that Ofgem continues to support the innovation of interconnectors and sees the potential for what they can do in the future.

Okay. Well, let's get into that. So commercially, how do interconnectors actually work? How do you get paid?

Okay. So, you know, we've talked about this great big wire that we have buried in the sea connecting these two different countries and the value being that you can flow energy from the energy system to the more expensive energy system, which creates a price spread, an arbitrage opportunity. I guess our job as National Grid for our interconnectors is to decide, when do we sell that capacity? And so, we have different traders, utilities, other organizations wanting to buy for various reasons. It can be just because they actually have businesses in different energy systems and they want to hedge those businesses, but it can also just be speculating on the markets. So, we sell the capacity in long term auctions right through to day ahead auctions and we create a kind of a glide path of when we want financial certainty, if you like. And also, we have to account when we're taking outages and things like that, give the customers assurance of when the asset will be available.

And then the value of that, I guess there's there's two kinds of value to that, and I know you've worked in training, so I'm going to use terms that you'll be familiar with, others might not, but there's the extrinsic value, so the the and the intrinsic value. So, what I'm really talking about there is the obvious value, I've got to, I'm able to flow energy from a high price, could be ten to a lower price, from a lower price to a higher price, which could be five, therefore the difference is five. So that capacity is worth five to me. But also, I might be buying that two years out and the price could change many different times.

It could reverse, so you know, what was the highest price becomes the lowest price or it could widen, it could narrow and of course, that's the flexibility value. So, the people who bid in to buy our capacity will have to take a view on what that's worth, right? The auctions where we sell our capacity are typically oversubscribed, And you know, we try our best to get as much value as we can because for that capacity and that will depend on us of course also being reliable operators. They know the capacity is gonna turn up, right, and they're going be able to flow the energy.

But we're super keen to do that because we operate under something called a cap and floor scheme, which means over a certain amount of return, all the money we earn goes back to consumers in the UK and we this is something that is incredibly motivating for us.

Okay. Well, let let's let's track the money first. So so you've built the cable, you've put in a big amount of CapEx into building this project, often splitting that sort of CapEx investment with someone else who typically owns fifty percent of it. Mhmm.

Then you have these auctions to sell off that capacity and you have them from say years ahead to sort of day ahead. That money then comes in to you and then you are are then sort of looking at that money and saying, okay, it's then assessed in terms of a cap and floor. So That's right. With the cap and floor, if it's below the floor, then it would get topped up to the floor, and so there's kind of the investment certainty.

If it's above the cap, and maybe let's talk about the above the cap example, like where does that money where does that money go? Okay. Who who who do you pay it to?

Yeah. So maybe just to set some parameters around the cap and floor. The is a twenty five year regulatory deal for interconnectors. So different to the tenure of CFDs, for example, which are, I think, what? Fifteen. Yeah. Hot topic, though.

I know. I know. Are very excited to make them twenty five. Yeah.

So, yeah. Twenty five years, and they are so the the National Grid has four assets operating under under a cap and floor, and they are reconciled, if you like, every five years.

Okay.

So the money flows, right, years one, two, three, four, five and at the end of five years, you true up, right? So what were the costs? Did you What returns did you make? Are you needing to be topped up because you've performed under the floor or are you needing to to hand some money back? And all our interconnectors under cap and floor are operating over the cap. Okay. And if I take the the interconnector that actually was the first cap and floor interconnector in the UK, Nemo Link, this is an interconnector to Belgium.

It's now in year six and a half, so it's gone through its first kind of true up, its first five year assessment period and I We gave I think about ninety million Okay.

To consumers at the end of that period, right?

Okay.

And what that means is that it goes through, it's it's almost like a credit that you give to network charges on consumer abuse. It goes through NISO, who are responsible for managing TINUOS and network charges on bills, it's kind of like a deducting item. So, we're really pleased that we've been able to achieve that kind of performance. It looks like we're going to be achieving similar performance on our other interconnectors in the first period.

Of course, we're aware, we're talking about a twenty five year regulatory deal, so you know, it's incredibly difficult to predict the future, but what we can, I guess, state is the rigor and the robustness of regulatory design? You know, a few years ago, when we were operating these assets with incredibly volatile and high prices, we weren't under the same scrutiny that others were at that time with making extraordinary profits because we were, you know, we were fortunate enough to be having very wide spreads between the highest and lowest price countries our interconnectors operate, but we know that we're capped out at a certain percentage, and all this money was going to consumers.

So we were able to announce three hundred million that we were estimating in totality going through to consumers.

It it feels a shame that it gets rolled into to Nuance. Sorry. We've said to Nuance transmission network use of system charges. It's a it's quite a dull acronym, that one.

But, it seems a shame that it gets rolled into Tenuous because wouldn't it be lovely if a customer saw on their bill this oh, look. Interconnection, like, minus six pounds, you know, for the for this year or, like, whatever it might be.

That that for them I'm writing it down.

It's it's it's yeah. But but but also, I think this perhaps leads into a question that we're coming towards around the Norwegian interconnection Yeah. Which is really what sort of takes ten years to build this thing, huge amounts of effort, huge amounts of capital, but then also the the life of these projects. We we're talking, you know, multiple decades for these projects, and you have to manage those relationships. And it feels that in some regions, if you don't necessarily have consumers feeling a six pound saving or a ten pound saving per year, but are just perhaps feeling that this interconnection is just causing problems on their grid, they might wanna get rid of them. Yeah. How do you manage that relationship?

Yeah. So I mean, we have a very long standing relationship with Statnet who are our partner on North Sea Link, which is the Norwegian interconnector. And they're incredibly sensitive to the sentiment of Norwegian consumers and the political concerns that there on the Norwegian link. I guess that what's interesting is when you see the reported sentiments about consumers fearing how much the the interconnection to the UK is driven at prices.

They don't recall the amount of the amount of money that they are making from from the And where that money is going from North Sea Link because it's been significant over Since it's been in operation since twenty twenty one. Equally, there has been periods where Norway has had shortages of hydro reserves and has been importing. Those periods can be in quite short term particular times of particular months or days. But again, if we look back in twenty twenty two, there was quite a significant Norwegian hydro drought.

It was when there was perfect storm with the nuclear outage and prices across, you know, course the gas price issue caused by the invasion of Ukraine. And we actually exported, I think about one point four terawatt hours during quite a short period to Norway to help them with security and supply issues they had at that time. So I think it's really interesting how the reactions we get to quite particular moments in time when we're talking about assets that actually designed to operate much longer than the twenty five year regulatory deal. I mean, I for our first interconnector is now in year thirty nine.

And you know, I think that the energy systems will change in years to come. Where we see actually for the Norwegian link, we believe that the peak of Norwegian demand will probably surpass their hydro in the late 2020s. So they're looking at their energy strategy at the moment. And if we go to roll forward to the 2030s, we believe they're going to be the recipients of plentiful cheap wind from the UK, because we've gone a lot faster with our wind build out, so you could see things really change.

So the importance is to really take a strategic view, a infrastructure tenure view Yes.

And to really understand what how this could play out in generations to come.

It's really interesting. We we had someone called Ricky Murkowski very recently who was talking about Nordic power markets. And he was obviously from the other side appealing to people to say, hey. Look.

You know, let's let's think about the UK system because if they go ahead and build a huge amount of offshore wind and they're they're looking like they will, a lot of that will come through at a wholesale power price, which is close to zero. Obviously, the the sort of end cost consumers is linked to the contracts for different scheme, and so it is still paid for by consumers. But the but the price, the wholesale price could be zero. And so for Norway, this could be a very good opportunity for them to be able to import those prices.

Yeah. And, you know, as we were talking about before, the conditions for building offshore wind in Norway are much more challenging than they are in the UK. So maybe in the future we'll see more offshore hybrid assets going to Norway, which pick up UK wind, but don't just connect it to the UK, but connect it over to Norway as well. So they have different markets to go to. So helps security supply, provides cheap power to to other countries and also releases constraint costs on the UK grid. So lots and lots of consumer benefits there.

Okay. I have two final questions before my two final questions. But my first my my my sort of my fourth final question is a very straightforward one, which is what is the end life of these of these interconnectors to is it so you mentioned thirty nine years for IFA. How how long might that run for?

So we see that with the right maintenance CapEx and refurbishment that we could potentially keep IFA going into the two thousand and fifty's. So I guess what's important to know is that's not just a national grid decision, right? We can have the shiniest asset on coast as we wanted, but if the RTE side of the asset wasn't maintained, that wouldn't really be a sensible strategy. So, it really enforces the partnership that you have, you know, not just developing and delivering and constructing the assets, but in maintaining them for decades.

And we've been very fortunate to partner with European TSOs who have very similar values and huge incredible engineering teams and asset management teams, security and resilience philosophies and obligations similar to our own. So that finding that partner you can operate with. So I think is really key. So we believe there's a case for getting a lot more life, safe life out of IFA, continuing to deliver benefits for consumers.

Really important to note that IFA is an example of an asset that paid back its CapEx a long time ago and operates under a different regulatory scheme. Essentially, half the profits from the asset go to consumers. So it's another one where we have been been able to declare significant value for customers in the years.

So in in the run of this episode, I received a text from Laurent who said, say, pass pass as regards to Rebecca. And I thought, excellent. And I I saw you on Redefining Energy last year, which is a great episode for anyone looking to sort of expand their knowledge further about interconnection. I know Laurent is looking at long longer cables. So there's potential to say connect the UK to the US. How likely do you think that is?

So I was in Helsinki about a month and a half ago with one of the world's largest vessel manufacturers and cable manufacturers, Prismium, to celebrate the launch of their new ship and to actually get on board and take a look around it, right? This is a huge ship that they announced is capable of laying cable two thousand meters below sea, right? So, if you think about having ships capable of performing all these activities, so digging the trench, laying the cables, then securing the cables at those kind of depths, then you are And we know we've got the cable, which we're seeing in front of us, which is produced to withstand those kind of sea conditions and with not too heavy losses, then we firmly believe those kind of projects are possible.

And yeah, we're really excited about the innovators who are coming to the market such as Laurent and others and looking at connecting much more uncorrelated markets and across much further distances. There's nothing from a technical perspective that we can see would form would would hinder that would stop that project being successful.

Feels like a system operator's dream to be able to connect the UK to New York ISO or to ERCOT, let's say, like, just they're so uncorrelated that it it would be fantastic. Yeah. But it's all about the price.

Okay. So moving on to the two final questions. So is there anything you'd like to plug?

I would like to plug markets.

So I think that we are moving into a world with increased and necessary strategic planning, and across, you know, energy vectors, networks. But I operate a business where the benefits of markets are clear every single day, And I just don't think in energy, when it comes to policy regulation, we amplify the benefits of markets to consumers, the benefits of attracting investment innovators, you know, commercial appropriate commercial signals in in energy. And I think it's one of the beautiful things about the UK the the UK energy context for so long. And let's just please not destroy markets.

Okay. Interesting. Julian Leslie, who came on, who is essentially overseeing the SSEP, strategic spatial energy planning in the UK, had that as his contrarian view, which was pushing pushing for markets. So it's certainly not something that's that's lost on people for sure.

May maybe just to kind of just to just to inquire a little bit about that. So buy markets, what is what is missing, or what are you worried about losing from markets?

So an example would be we can build all the fantastic infrastructure we want, but if we don't operate it according to economic market signals, then one quickly see the consumer value dissipate from that infrastructure. So, you know, if we think about the UK moving forward with market reforms that aren't in line with Europe, for example, does that leave infrastructure like offshore wind, interconnection and how will that flow electrons, will that be suboptimal for consumers going forward? I think that we really do need to take a step back and understand the interplay with markets and infrastructure for the future energy system we're building.

Okay. So maybe just to put this into an example, if you had say a large subsidy scheme paying for wind but outside of the wholesale market, And if you had that in the UK but also in in another country that we were connected to, that you can in theory have wind being paid in both regions but the wholesale price in both regions being zero. And then for you as as someone who's selling capacity on an interconnector, well, if the price is zero in both regions, well then, like, what can you do?

Exactly.

But actually, that market is paying money to those generators to turn up and to generate, but it's just not being seen in the market. Exactly. The more you resolve off market, the sort of worse that could become.

Yeah. I mean, I think that we that there are plenty of assets where optimization really depends. It's it's it's the the easiest way to optimize and to, as I say, deliver value for the investor, but also for consumers as a whole and the wider energy system is to have appropriate market schemes setting the incentives. Can be whether it's ancillary services that we're, you know, flexibility markets, general wholesale markets.

There's plenty of examples. Let's not kill the markets just because we're building lots of infrastructure.

Okay. I love that plug. And moving on to a final question which is, is there a contrarian view you hold, so something that you believe that the majority of the market doesn't?

So I was saying earlier that I would describe myself as a hypercritical contrarian, so I could list these off. But the the key one I'd like to voice here would be the UK can develop as thorough a domestic network plan as it would like. If it doesn't connect to other European, particularly, you know, North Sea countries, it's not finished. Mhmm.

It's not thorough. It's not thought through, and it won't be operable for the benefit of for the optimal benefit of consumers in the future. So we have to start recognizing the importance that an interconnected grid with Europe plays now, and increasingly so in the future, we've just spoken about, for, you know, the absolute basics of our energy system, we've got to work in a coordinated way with them, from policy to project development, infrastructure development, market reform, you know, etcetera going forward. So, I really really hope to see a bit more coming from the NESO strategic plans that don't just stop midway in the North Sea where the UK territory ends, but sees how that joins up to other grids and understands how that's going to flow through too.

I think I'm hearing wild assumptions sometimes about how interconnectors will flow and what's happening on other grids, and then I go and talk to our partners about the challenges they have or whether they've had these conversations with the UK and we just don't seem joined up. So, let's join up, let's take the opportunity to really take a more holistic view, not just a solely UK domestic view when we're doing the strategic planning.

Yeah. I think that's a that's a great end point to leave it on. Rebecca, thank you for being our first bringer of a prop, our first hypercritical contrarian and a fantastic guest all around. I'm sure our listeners will have learned a huge amount. Thank you.

Alright. Thanks, Ed. Thanks for having me.