Earlier this month Taoiseach Leo Varadkar and French President Emmanuel Macron signed a letter confirming plans to build a new 700MW Celtic Interconnector. With the looming context of Brexit, volatile energy prices and discussions about how to enable high volumes of renewables, Cornwall Insight Ireland has examined the likely flows between Ireland and France over this potential new interconnector.

Earlier this month Taoiseach Leo Varadkar and French President Emmanuel Macron signed a letter confirming plans to build a new 700MW Celtic Interconnector. With the looming context of Brexit, volatile energy prices and discussions about how to enable high volumes of renewables, Cornwall Insight Ireland has examined the likely flows between Ireland and France over this potential new interconnector.

The research shows that if the Celtic Interconnector was in operation over the 240 weekdays examined, power would have flowed from France to Ireland for 200 days, compared to just 40 days in the other direction. In such a scenario, the cheaper French power would have helped bring down Irish wholesale energy prices.

The below chart shows the differential between Ireland and France day-ahead baseload wholesale power prices across all weekdays between 1 June 2018 and 30 May 2019. Positive figures reflect power being cheaper in France, and negative figures show power being cheaper in Ireland.

Conall Bolger, Head of Ireland at Cornwall Insight Ireland, said:

"As the direction of interconnector flows are primarily influenced by price differences between the markets, the level and timing of price variation between the markets matters. This analysis suggests that had an interconnector been in place, flows would predominantly have been from France to Ireland. This effect was more likely during the winter months, a period of traditionally higher demand and pricing in Ireland when the additional power would be welcome.

"In reality, the flows will be more complicated than this model suggests as the physical limits of the infrastructure play an essential role. However, the market is moving in ways that suggest this project could be an important one.

"Ireland's plans to increase our renewable fleet will impact on prices through price cannibalisation - where low-cost renewables drive down wholesale prices across the market - and contribute to price volatility. We have seen evidence of both effects with our current level of renewable generation since the opening of the new market in October last year.

"In comparison, France has a sizeable nuclear fleet which supplies a predictable flow of energy. This interconnector could help prop up prices during high wind output periods, depressing price spikes when the wind is not blowing.

"In the longer term, France is planning to reduce the size of its nuclear portfolio by 50% by 2030; media reports note the French system operator has warned about a huge oversupply of power this summer suggesting they may need markets into which to export. Ireland will continue to develop its renewable portfolio, suggesting they may need sources of flexibility. There is a potential alignment of interest."