Britain and Norway sign pact on new power interconnector

By Nora Buli

OSLO (Reuters) - Britain and Norway on Thursday signed a bilateral treaty on electricity interconnection to help formalise power trading between the two countries, Britain's ministry for business and energy (BEIS) said.

The agreement comes ahead of the start of commercial testing operations in October of the North Sea Link, the first electricity interconnector between the two countries.

"Today's agreement ensures that the full benefits of the North Sea Link interconnector are realised by ensuring that the trading arrangements over North Sea Link are market-based and transparent and that the maximum securable level of capacity of the interconnector is made available for use," BEIS said in a statement.

The BEIS said the North Sea Link would help reduce wholesale electricity prices, and cited an estimate from regulator Ofgem which said savings for customers' annual energy bills could total 3.5 billion pounds ($4.84 billion) over the next 25 years.

The 1,400 megawatt (MW) cable's start-up comes as electricity prices in both countries are at multi-year highs, albeit UK prices at a steep premium, suggesting the cable will initially export power from Norway to Britain.

Britain aims to benefit from Norway's vast hydropower resources to help balance intermittent wind power, while Norway can import cheap surplus renewable energy to save water in its hydropower reservoirs.

Thursday's agreement, which follows Norway's free trade agreement with the UK signed in June, also sets out commitments to co-operate on developing further interconnection, including cables, which combines cross-border electricity transmission with offshore wind generation in the North Sea, BEIS said.

National Grid has started planning a potential 1,800 MW offshore wind interconnector with Norway.

Thursday's agreement does not contain any obligation to carry out any projects and can be terminated with 12 months' notice, Norway's oil and energy ministry said in a separate statement.

($1 = 0.7238 pounds)

(Reporting by Nora Buli; editing by Jason Neely)