Economic benefits of accelerating submarine cable repairs – interconnector case study

By Jakub Vastmans, Senior Manager Service Product Management at NKT

Over the past decades, thousands of kilometres of high-voltage submarine cables have been installed, making them a critical element of our electricity infrastructure. Most prominently, they enable the transmission of offshore-generated wind energy by serving as array and export cables. However, the main application of submarine cables is still interconnectors – cables transporting large amounts of power from one market to another, facilitating the increasing incorporation of intermittent renewable energy sources as part of the green energy transition.

HV interconnectors are extremely reliable and low-maintenance means of power transmission, potentially generating massive economic benefits. Failures of such cables are one of the main concerns of their operators, because the cable downtime carries a massive economic cost and the repair itself is a complex offshore intervention.

Recently, NKT conducted an emergency repair on such an interconnector (Baltic Cable) in only 29 days – much faster than the industry benchmark, often set at 3 months. The purpose of this article is to outline, based on the Baltic Cable example, how much more economic value can be retained by making adequate preparation for performing repairs in less time.

Arbitrage benefits created by an operable interconnector

The primary economic benefit interconnectors generate is the opportunity for arbitrage. Because they connect two markets with different prices, the opportunity to purchase electricity cheaply in one market and sell it expensively in the other arises.

Figure 1: Hourly day-ahead electricity price in the first half of 2020

The Baltic Cable connects the Swedish and German markets. In Figure 1, we can see that, in the first half of 2020, the arithmetical average price in Germany was ~€23/MWh, while in Sweden it was ~€4/MWh lower; however, the momentary price difference can be significantly more pronounced, as Swedish prices tend to spike while German prices can turn negative. The high variability in the difference between the two is revealed by the hourly price difference heatmap shown in Figure 2.

Figure 2: Hourly day-ahead electricity price difference between Sweden and Germany (left) and cumulative daily energy flow (right) from 20th April to 30th June 2020

One can see that the price balance between Germany and Sweden swings back and forth, making it beneficial to send power from Sweden to Germany at certain times (blue) and from Germany to Sweden at others (orange), provided that the grid surrounding the interconnector can handle the flow. Periods where prices are roughly equal (white) show that arbitrage is not always possible.

This price data also reveals several interesting patterns. For example, electricity in Germany seems to be considerably cheaper on Sundays, especially during the day. A closer look at Germany’s energy mix during such times (example shown in Figure 3) reveals the main driver: Germany has a very high share of intermittent renewable energy sources (wind and photovoltaic), which, combined with low demand during the weekend, can send prices negative.

Figure 3: German power consumption and generation by source (GW – stacked area chart) with price difference between Germany and Sweden (€/MWh – coloured data table below chart) on Sunday 24th May 2020

Counter examples (such as those shown in Figure 4) confirm that when renewables are less pronounced, e.g. due to unfavourable weather conditions, the prices in Germany remain higher than in Sweden. The occurrence of such patterns highlights the need for increased interconnection between the different markets to facilitate the most efficient sharing and distribution of renewable energy, which is often intermittent due to its dependence on weather conditions. This will be especially important if Europe’s renewable energy goals are to be reached without undue difficulty.

Figure 4: German power consumption and generation by source (GW – stacked area chart) with price difference between Germany and Sweden (€/MWh – coloured data table below chart) on Sunday 14th June 2020

Economic benefit of performing a fast repair

On 29th April the Baltic Cable (currently the only direct interconnection between the Swedish and German electricity markets) failed. The resulting power flow interruption can be seen on the right side of Figure 2. Fortunately, it was possible to repair the outage in only 29 days from notification to NKT, allowing power to be transmitted through the interconnector from the 29th May onwards.

Had the repair taken longer, the arbitrage benefits that materialised in the days after repair completion would have been lost completely. For example, if the outage had lasted 30 more days (i.e. until the 28th June), the value lost would add up to ~€4m (simply calculated as the sum of hourly power flow multiplied by the day-ahead price difference). This implies that each additional day shaved off the outage duration protected, on average, ~€130k, which corresponds to ~€5.5k per hour!

It is also important to note that the activities carried out during the repair were no different from those performed during a ‘normal’ repair. The speed at which this repair could be completed must be largely attributed to the excellent preparedness of the cable operator and NKT, combined with joint experience in conducting similar projects together in the past, resulting in optimised processes. This emphasises the need to make adequate investment in properly preparing all the documentation, components and suppliers required to conduct a repair well – if you wish to reap the benefits of short outage times.

NKT has a suite of services for ensuring maximum preparedness

With more than a century of power cable experience, NKT’s Service & Installation Business Line is the ideal service partner for maximising the availability of submarine cables. Besides having a broad portfolio of services (ranging from the creation of Repair Preparedness Plans to a 10-day cable repair vessel availability guarantee for its Marine Resource Plan customers), NKT is continuously working on improving and developing new solutions to further shorten repair times. For example, NKT recently expanded its spare parts management solution so that it now also allows for long-term storage of submarine cables. This initiative will soon make 30-day repairs the new standard – provided cable operators invest adequate resources in preparations, specifically by setting up Repair Preparedness Plans and Service Level Agreements with suppliers like NKT.

Data used for figures and calculations courtesy of Bundesnetzagentur | SMARD.de (accessed 09/10/2020)

See how NKT repaired the Baltic Cable in 29 days

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Photo: NKT

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