U.K and Norway to Build $2.2 Billion Electricity Link

By Rory Gallivan and Kjetil Malkenes Hovland 

OSLO--Power-grid operators in the U.K. and Norway agreed on Thursday to build a EUR2 billion ($2.2 billion) power cable that will connect the countries' electricity markets in 2021--enabling the U.K. to import Norwegian hydro power when the wind isn't blowing, and potentially cutting electricity bills.

Norway's grid operator Statnett SF and the U.K.'s National Grid said that the power cable will be the world's longest, stretching 730 kilometers (450 miles) across the North Sea. The operators will share the investment.

"Britain will benefit from Norwegian green hydropower, at the flick of a switch, providing green backup power when the wind's not blowing, and this will actually save people money," said U.K. Energy Secretary Ed Davey.

The U.K. power grid is already connected to France, the Netherlands, Ireland and Northern Ireland, with four gigawatts of exchange capacity--equal to 5% of the total U.K. generation capacity. The U.K. aims to boost its exchange capacity to the European Commission's proposed benchmark of 10% of generation capacity.

National Grid is working on a power link with Belgium and is also considering a future link to Denmark. The power cables are part of a bigger European plan to widen the electricity market, boost the exchange of power and reduce stress on the network caused by unexpected shutdowns.

"I am proud we are now seeing a huge increase in Britain's energy options, and the prospect of a real single energy market and energy super grid in Europe," Mr. Davey said.

The U.K. is currently a net electricity importer. Last year, it imported a record 20.5 terawatt hours, or 6% of consumption, up 42% on the year mainly due to increasing imports from France, according to government statistics.

Increased exchange of power with other countries can help reduce U.K. consumer bills, according to National Grid. Last year it estimated that a doubling of the country's power-cable capacity to between 8GW and 9GW would save up to GBP1 billion ($1.49 billion) annually in U.K. electricity bills.

"Access to low-carbon energy from Norway hydropower stations will help us meet the challenge of greener, affordable energy," said National Grid director Alan Foster. "It also adds to the diversity of energy sources for U.K. and potentially can reduce peak prices."

Norway, close to 100% self-sufficient on hydro power, currently has four power link-ups to Denmark, one to the Netherlands, and plans one to Germany by 2019.

The U.K. link will be "an important contribution to the increase of renewable energy production on both sides, and thereby an essential part of the future electricity system," said Statnett chief executive Auke Lont.

Write to Rory Gallivan at [e-mail] and Kjetil Malkenes Hovland at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires