The UK is expected to see its record energy exports to Europe decline from November onwards. The country exported more than 8TWh to European markets this summer. A reversal would be explained by a decline in overall energy production.
NBP gas prices fall against the TTF
The UK has traditionally been a net importer of energy from the European continent with its 4GW interconnection capacity. Nevertheless, the price of NBP (National Balancing Point) gas fell sharply against the TTF price during the summer. Indeed, the price difference between NBP gas and TTF gas reached approximately 90.74MWh in the third quarter.
In addition, the dip in French nuclear generation is driving up prices in France relative to the UK. The National Grid is considering control measures if prices are below the export feed-in tariffs. During the summer, National Grid was buying back exported energy.
Indeed, the buy-back via the interconnector on the Nemo line to Belgium amounted to £9.725MWh. The loss to the UK was £6,000/MWh. However, net imports from the United Kingdom to France continued in October.
The outlook from October onwards
Flows between the Netherlands, Belgium and the United Kingdom, of 1GW each, show a bidirectional trend. Thereafter, net exports from Great Britain will amount to 0.1GW in November, including 1.2GW to France. After that, the UK could return in December to a level of 5.6GW.
The restart will take place after a fire in an IFA -1 interconnector with a capacity of 2GW. This would allow the UK to bring the balance between energy imports and exports to zero. This compares to a net export of 25TWh in 2021.
Finally, projections call for record average import levels of 5.6 GW before a slight decline this summer. The availability of French nuclear power plants, of which less than 50% are in operation, is the variable apart from the weather. Thus, British imports depend on EDF’s ability to restart these 20 reactors by early next year.
European market forecasts
The capacity of the UK subsea interconnector has increased tenfold in recent years. National Grid recalls that the 1.4GW North Sea Link (NSL) was coming on line last year. NSL generated imports of 4.6TWh and exports of 1.1 Wh over this period.
Energy prices reached record levels this past summer. Nevertheless, low-cost, low-carbon energy imports from hydrocarbon-rich Norway were having an impact. In fact, wind power generation capacity remained underutilized during this period.
In addition, the success of the NSL played an important part in Norway’s decision. Oslo decided to reduce its imports and preserve its resources in anticipation of the winter. Market price signals diverge from estimates for connections between Europe and the UK.
The gas for electricity exchange
The gas market spreads are a signal that the NBP will experience an upward price curve in the first quarter of 2023. These forecasts have a significant margin of error. Indeed, the NBP will be close to its central price or slightly below the TTF over this period.
In addition, the UK is expected to continue its net gas exports to the US this winter. The UK’s exit from the European Union in 2020 is projected to play a role. For the first time, this political decision will have consequences on the energy market.
The European Commission is calling for a study on the consequences of the cap, based on a gas-electricity exchange. They wish to analyze the financial impacts of unsubsidized electricity flows to non-European neighboring countries. Indeed, the existence of this gas for electricity exchange on the Iberian Peninsula includes a border adjustment mechanism.
