The direct interconnection of the UK and Nordic power market – Impact on social welfare and renewable energy integration

United Kingdom and the Nordic power market have plans to interlink directly through a sub-sea power transmission line in The North Sea. Such power market couplings have complicated implications for the interconnected energy systems and for different agents in the common power market. We analyse this case by modelling the hourly operation of the Nordic-UK power market coupling, considering the local district heating (DH) system in each country as well. According to the results, after the operation of the new interconnection between Norway and the UK (North Sea Link), the overall socio-economic benefits (social welfare) in the region will likely improve by 220–230 million euro per year, without considering the cost of the interconnector itself. The UK-Nordic market coupling enhances the flexibility of the UK power system in wind integration, irrespective of the share of wind in the Nordic countries. However, increasing wind capacity in the UK will diminish the expected economic benefits of the link. The merit order effect of wind integration in the UK will reduce the price gap between UK and Norway, and so the congestion income of the link in many hours a year when the link is congested from Norway towards the UK.