Nether-lands

APX-ENDEX tradesMWh/day, average

BritNed: Sharing Energy with Energy Shares

The new BritNed interconnector between Maasvlakte, in the Nether-lands, and the Isle of Grain in the UK is a major step towards a trans- European power market.

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Power markets are another way the world is getting a bit smaller. Beginning with a high-voltage direct-current (HVDC) link to France 25 years ago, the UK continues to expand the power grid with its European neighbors, recently commissioning a new interconnector to the Netherlands (BritNed).

Text: Daniel Whitaker, Illustration: Ciaran Hughes

Source: BritNed

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There are two ways to buy or sell electricity through BritNed and elsewhere in Europe. In either case, pow-er suppliers will do so in conjunction with contracts with end users. Cheaper electricity in one country can meet demand and reduce prices in another country. Prices will become equal across adjacent countries as long as there is sufficient transmission capacity. The first way, “explicit” trading, involves the suppliers buying capacity on the BritNed interconnector (in ei-ther direction) for a certain period and then separately purchasing the power itself to run over that capacity from traders. BritNed holds auctions for capacity across different time scales, i.e., annually, seasonally, quar-terly, monthly, multiday and intraday. In order to help guarantee future access, BritNed won’t sell capacity any further out than a year ahead.One example of the monthly auctions was the first explicit auction, held on March 24, 2011. In it, 300 MW were offered for April 2011. In the direction Nether-lands to Great Britain, the price was €2.56 per MWh,

How European Electricity is Traded over BritNed

a British-Dutch partnership, following in the path of corporate success sto-ries such as Shell and Unilever. There is no single leader above Operations Director Philip O’Gorman in the UK (Nigel Wood’s boss) on the engineer-ing side and René Kerkmeester in the Netherlands, its Commercial Director, who steer the limited company in tandem. “Coalitions are in fashion,” points out Nigel Wood, referring to the fact that both the British and Dutch governments currently operate on this basis. Kerkmeester and Wood agree that the two nationalities have strengths and weaknesses, but the team knows this well enough to play to the former. Wood describes the Dutch as “quickly responsive” and the British as “good at meeting deadlines.” Kerkmeester lived long enough in London working before in telecoms to have skill at blending “Dutch direct-ness and British diplomacy.”

The British and Dutch transmission system operators National Grid and TenneT have taken a major step for-ward in the process of establishing a single physical power market by building an interconnector between the Netherlands and the UK. BritNed, as it is known, was agreed upon in 2007, with cable manufacture starting the following year, and an intensive two years of construction before its commissioning ceremony took place in April 2011. The interconnector runs 260 kilome-ters from Maasvlakte, a port district near Rotterdam reclaimed from the North Sea in the 1960s. “The link doesn’t follow the shortest path to the UK,” says Nigel Wood, BritNed’s Head of Technical Operations, “since the Essex/Suffolk landfall this would de-liver is fast eroding and prone to sea-bed subsidence.” Instead, BritNed begins stretching north, but then turns in towards the northwest. The cable meets the UK at the Isle of Grain, the end of a peninsula by the mouth of the River Thames in the English coast-al county of Kent. Grain (originally meaning “gravel”) is a marshy area, now dominated by two large oil- and gas-fired power stations. “We worked ankle-deep in mud,” recalls Wood of construction there. While the twin copper cable normally operates bipolar at 1,000 MW, if need be, BritNed’s powerful HVDC link – the brain and the heart of the system – can switch them to monopolar operation at reduced power of 500 MW within two seconds to provide the right amount of energy needed at the right time. For Global Marine Systems, the cable layer, burying the cable was a chal-lenge. For a start, seven other utility cables (principally telephone and gas) had to be crossed. Also, while the ca-bles are mainly buried in solid clay on the UK side, at Maasvlakte it is mostly sand, which could easily shift and leave the cable uncovered and vulner-able. “To deal with this,” says Wood, “a mass float excavator was needed. That’s basically a 5-tonne vacuum cleaner hanging off the back of a

boat.” The excavator blew any cover-ing sand off the cable, so that it could be safely covered with stones. The British and Dutch grids transmit using alternating current (AC), but the BritNed interconnection allows power transmission of 1,000 MW using a direct-current (DC) transmis-sion voltage of 450 kV. This means converter stations are needed at each end. Siemens has provided both. Within the valve hall of each of the 282-tonne units, 12-pulse direct-light triggered thyristor valves are attached to each end of the cables to transform the power. Beyond them, AC switch-yards act as interfaces with the two countries’ transmission systems. A short underground AC cable system links the UK converter station to Na-tional Grid’s 400-kV Grain substation. At Maasvlakte, there is a short over-head line to connect with TenneT’s local 380-kV substation. Each converter station uses six 210-MVA transform-ers to feed the AC power into the thyristor-based AC-to-DC conversion. Describing the converter stations, Wood praises Siemens’ “efficiency and ability to act as a team player.”

Security Aspects a High PriorityBritNed’s goal is to have the highest security standard possible to achieve zero incidents. In order to comply with all regulations in the UK and the Netherlands, they strictly follow the guidelines of the SHESQ policy: safety, health, environment, security, and quality. The focus is on critical areas of business where safe behavior by man-agers, employees, contractors, and agency staff is essential to safeguard employees and the public. Strong se-curity guidelines have been developed, and the design of the HVDC arrange-ment was considered with these as-pects in mind. Local Siemens experts are well versed in the security aspects and worked with National Grid and TenneT from the very beginning to re-alize their concepts and ideas. But while suppliers come from all over Europe, BritNed is very much

and in the direction Great Britain to Netherlands, the price was €0.39 per MWh. A total of twelve cus-tomers took part and ten were successful in purchasing capacity. BritNed’s explicit trading is facilitated by an innovative trading software platform, known as King-dom, provided by partner organization Unicorn Sys-tems, based in Prague. Nineteen traders – large utilities and financial institutions – currently participate. The alternative is “implicit” trading, which takes place at APX. In implicit auctions, the transmission capacity is auctioned together with the electricity. Capacities and flow direction are determined during the combined electricity trading and transmission capacity auctions so that the electricity, usually to the greatest extent possible, flows to the market region with the highest price – and the higher demand for power. This approach is also known as “market coupling,” as it involves link-ing two national markets together. Trilateral market coupling has taken place between France, Belgium, and the Netherlands since 2006.

In keeping with its shareholders’ role, BritNed is a “shipper” rather than a supplier of power. This means its key objectives must be physical reliability and a focus on giving interested sup-pliers – wherever they are – whatever they could possibly need. Equipment from Siemens and other suppliers to BritNed helps to ensure reliability. Delivering whatever is needed is achieved through a customer-focused attitude rare among interconnectors. “Were more customer driven than other cables [interconnectors],” says Kerkmeester. “It’s unusual that we have a customer relations team.”For those wishing to trade power over BritNed, there is a choice of two trad-ing formats (see sidebar on Electricity Trading), either through an explicit trading system developed by BritNed and its partner Unicorn Systems hosted in Prague or via APX-ENDEX in Amsterdam (see APX sidebar). An-

drew Claxton, Director of Business services at APX, thinks they are suc-ceeding: “BritNed is at the forefront of innovation; they’re creative at finding the best ways to sell capacity.”

A Matter of Social Importance In an article in the Guardian (UK) in April 2011, Wilfried Breuer, Head of Power Transmission Solutions at Siemens, commented on the idea of a European supergrid, which gained momentum in December 2010 with the signing of an agreement by all ten countries bordering the North Sea to coordinate deployment of new HVDC cables that would maximize the use and sharing of renewable energy be-tween them, including wind power from the UK, solar power in Germany, and hydropower from Scandinavia. Said Breuer: “The supergrid will be built, but gradually. It’s not one

“ BritNed’s benefi ts in-clude greater effi ciency, help to inte-grate wind power, and improved security of supply.”René Kerkmeester, Commercial Director of BritNed

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investment like a highway. It will de-velop over 10 to 15 years, leg by leg.”For René Kerkmeester, though only two months into his job, this is one part of what makes working at BritNed so satisfying. The electricity sector involves complex, long-run investment decisions: BritNed cost €600 million to build. And Kerkmeester notes that this combines with a day-to-day envi-ronment in which anything can hap-pen – a case in point being the German “Energiewende,” a rapid policy shift towards renewables. Another source of reassurance to Kerkmeester is that with so many connections from energy to the econ-omy and to people’s lives, he believes BritNed’s activities also have social importance. BritNed’s social value is particularly clear in the case of renew-able generation – a point emphasized by UK Energy Minister Chris Huhne at BritNed’s opening ceremony. Britain has a growing portfolio of wind gen-eration in the North Sea (14 GW are planned, much of it connected to the UK grid by Siemens), but a much-com-

mented weakness of such power is its “feast/famine” intermittent nature. With BritNed, gale-driven excess UK power can be passed to the mainland. When the same weather system then moves over to northern Germany (as often happens), the new German excess can be passed back to Britain. Thus, the interconnector makes renewables a far less volatile form of generation. BritNed’s benefits, says Kerkmeester, “include greater efficiency, help to

APX-ENDEX is another Anglo-Dutch venture with Belgian participation. It has evolved from the Amsterdam Power Exchange, launched in 1999 as the first place on the European main-land where power could be bought and sold. Since then, APX has grown to encompass six spot markets and four futures markets, trading gas and electricity. As with BritNed, APX is owned only by transmission compa-nies, keeping it independent of those who trade and supply power. The exchange group has grown at a double-digit rate over the last three years, and looks set to keep thriving. Paul Groes, an APX Account Manager, who comes from a utility background, relishes the “diversity” of APX. “Here, I deal with a wide range of compa-nies, from many countries,” he says. Communications Officer Sanna-Maaria Mattila from Finland agrees, adding, “APX has a young dynamic, with 15 nationalities represented between 150 of us.”The staff works in an efficient, mod-ern building, opposite the great Arena Stadium of Amsterdam’s Ajax foot-ball club. As we pass the bank of 30 computer screens that makes up the spot price trading floor, there is an

atmosphere of relative calm. But this changes abruptly at noon each day as bids and offers stream in to set the prices for the next day’s mega-watt-hours of electricity and thermal units of gas. Activity is more steady on the neighboring floor, where a dozen screens reflect futures prices, though on average, more volume is transacted here. Andrew Claxton, APX’s Director of Business Services, highlights APX’s role in helping move the EU towards a single set of prices for power. “Dur-ing 2011, for 55–75 percent of hours, there was a single price across France, Belgium, the Netherlands, and Ger-many. Once you allow for transmission costs, natural losses, and import charges, the same was true for Britain and the Netherlands over 75–85 per-cent of hours.” This means optimal usage of transmission capacity for grid operators and more efficient energy prices for users. “BritNed is an impor-tant part of this convergence,” Claxton continues. “It has added 10,000 to 15,000 MWh/day via auction to the 40,000–45,000 MWh/day APX trades in other UK power markets. Over in Britain (where other exchanges oper-ate), they no longer feel they are an

Communications Officer Sanna-Maaria Mattila typifies the young, international dynamic of APX-ENDEX.

No ordinary office: Simple surroundings belie the critical power trading going on at APX-ENDEX.

APX Account Manager Paul Groes enjoys the diversity of both his work and his client base.

APX-ENDEX: a Hub of Activity

island system. BritNed has created a reference price for their daily power auctions, which previously lacked liquidity – with Europe acting as a giant market maker.”

integrate wind power, and improved security of supply.”One still evolving area of interconnec-tion is its regulation. BritNed offers guaranteed third-party access in re-turn for exemptions from some tariff regulation. Regulators are currently proposing a “cap and collar” regime that allows prices to vary between fixed minimum and maximum levels. René Kerkmeester sees this as “a fair compromise, sharing risks between

consumers, investors, users, and trad-ers. We just want a level playing field.” If the regulation is right, then there will certainly be additional interconnec-tors across the North Sea. In the mean-time, those on the BritNed team ap-pear to relish their pioneering role. p

Facts

BritNed is a

€600 million joint venture between two electricity transmission companies,

Dutch TenneT and British National Grid.

The joint venture has developed, built, and commercially operates

the 260-km-long

high-voltage direct-current (HVDC)electricity interconnector,

with a capacity of 1,000 MW,between Great Britain and the Netherlands

(operational since April 2011).

The interconnector has

voltage levels of ± 450 kV DC;400 kV, 50 Hz AC (UK); 380 kV, 50 Hz AC (Netherlands)

and 6 x 210 MW transformers.

BritNed offers a blend of implicit and explicit auctions. APX-ENDEX is the central counterparty to all implicit trades.

Trades automatically match across borders to the extent capacity is available.

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Daniel Whitaker is a freelance technology and business writer who divides his time between the UK and Spain. His work has appeared in the Financial Times, the Times and the Economist, among others.