Brexit Clouds Outlook for New Electricity Links With Europe
Brexit Clouds Outlook for New Electricity Links With Europe
One of the companies planning a power link between the U.K. and France said it is vital that the nation stays in the European Union or has access to its single energy market for such new mega projects to have a future.
Aquind Ltd.’s interconnector, which could supply 4 million British homes once it’s online in 2023, is one of almost a dozen cables under consideration by utilities and private investors that would increase power trading with the continent.
Britain’s reliance on supplies from abroad surged to a record in the first quarter and are likely to keep rising in the next decade as several nuclear and coal plants finish their life by 2025. That makes the new cables even more vital.
“Today, we only have one problem and that is the regulation, and all the interconnectors have the same,” Alexander Temerko, founder of Aquind, said at an interview in London. “If Brexit goes well and we leave with a deal, or if we stay in Europe, I think everything will be fine. If not, I don’t know what will happen.”
A deal is in fresh doubt after Prime Minister Boris Johnson’s Northern Irish allies on Thursday warned they will not support his proposed agreement, despite the progress made between the EU and the U.K. negotiators. Temerko, who’s donated more than 1 million pounds ($1.3 million) to the Conservative Party, counts Johnson as a friend, both “politically and socially,” even if they disagree over Brexit, with Temerko preferring to stay in the European Union.
Aquind’s cable would run between Normandy and Portsmouth on the English south coast. The project is also complimentary with government plans to build hundreds of thousands of new homes in southern England, Temerko said.
He expects to see a return on investment in about seven years, compared with an average of 10 to 15 years in the electricity sector and even longer for oil and gas facilities, Temerko said. The cable will be paid for through project finance and Aquind will be the sole shareholder. Owners of cables charge traders and utilities a fee to use capacity to transfer electricity from one market to another.
“It’s a good opportunity to get cheap electricity from France,” Temerko said, who expects the 2,000-megawatt cable to cost 1.4 billion euros ($1.55 billion). If Britain wants to develop more renewables, then more interconnectors are a must because of the intermittent nature of solar and wind, he said.
National Grid Plc, the U.K. network manager, has also put interconnectors at the heart of its growth strategy. It’s pressing ahead with the projects already under way, including cables to France, Norway and Denmark. Its future plans include second cables with Netherlands and Belgium.
“We continue to believe the underlying consumer and investor case remains strong for interconnectors post-Brexit,” a National Grid spokeswoman said by email. “However, we would of course like to see tariff free trade continue to ensure consumers at both ends of the cables are able to enjoy the full benefits of interconnectors.”
No-Deal Report
In its No-Deal Readiness Report published earlier this month, the government said the nation will be outside the EU’s internal energy market if it leaves the bloc.
Temerko, who was born in Ukraine, got his start by rising through the ranks of Russian politics during the Boris Yeltsin era in the early 1990s before becoming deputy chairman at Yukos Oil Co. He moved to the U.K. in 2004, became a British citizen in 2011, and has been active in the North Sea oil and gas sector.
Temerko said he has raised the issue of international power cables with Johnson.
“Boris is pro interconnectors,” Temerko said. “He said the U.K. needs more and cheaper electricity quickly and that he will support such businesses.”
--With assistance from Mathew Carr and Hayley Warren.
To contact the reporter on this story: Lars Paulsson in London at lpaulsson@bloomberg.net
To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net, Rob Verdonck
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