Interconnector

An interconnector is a transmission link that connects the power systems of two countries, market areas or separately operated grids, so electricity can flow between them. Many interconnectors are HVDC cables or overhead lines, especially across seas or between unsynchronized systems, while others are high voltage AC lines crossing a land border. The term is most common in Europe, Great Britain and Australia; in North America similar links are usually called interties or tie lines.

Interconnector capacity is allocated either implicitly, through market coupling that matches bids and offers across borders in the day-ahead and intraday markets, or explicitly, through auctions of transmission rights. Power normally flows from the lower-priced to the higher-priced area, and the price difference multiplied by the flow generates congestion income for the owners.

Interconnectors are developed under different models. Some are built by national TSOs and recovered through regulated tariffs, others are merchant projects that rely on congestion income, and Great Britain uses a cap and floor regime that keeps revenue within a band. Their value depends on price spreads, availability, capacity market participation and how the generation mix evolves on each side.

For grid operators, interconnectors improve security of supply, share reserves and help integrate variable renewables across wider areas. For developers and traders, they shape price formation, curtailment risk and competition on both sides of the link, and a new link can change market fundamentals substantially when it enters service. Developers of new links also face permitting in two jurisdictions and must agree cost sharing, technical standards and operating rules between the connected systems.