UK PARTICIPATION IN INTERNATIONAL ELECTRICITY TRADING SYSTEMS

Introduction

The United Kingdom participates extensively in international electricity trading through physical electricity interconnectors, bilateral arrangements, wholesale electricity markets and regulatory cooperation with neighbouring European states. Interconnectors allow electricity to move between Great Britain and markets including France, Belgium, the Netherlands, Norway, Denmark and Ireland. As of 2026, Great Britain had ten operational interconnectors connecting it with seven neighbouring markets, providing approximately 10.3 GW of capacity. In the year to September 2025, approximately 43 TWh of electricity was imported through interconnection and around 12 TWh exported.

Legal and Regulatory Framework

International electricity trading is principally governed domestically by the Electricity Act 1989, electricity interconnector licences administered by Ofgem, network codes, market rules and the post-Brexit relationship established by the EU–UK Trade and Cooperation Agreement (TCA).

After Brexit, Great Britain ceased participating directly in the EU Internal Electricity Market's standard market-coupling arrangements. Interconnector capacity and electricity are generally traded separately under alternative arrangements. The UK Government recognises that this can sometimes create inefficient electricity flows or under-utilisation of interconnector capacity because traders must separately coordinate electricity purchases and transmission rights.

Northern Ireland has a distinct system. The Single Electricity Market (SEM) operating across Ireland and Northern Ireland continues, supported by provisions arising from the Withdrawal Agreement framework.

EU Internal Electricity Market Reintegration

International electricity trading policy is currently undergoing significant development. Formal negotiations concerning possible UK participation in the EU Internal Electricity Market began in May 2026. The contemplated Electricity Agreement is intended to create closer integration of wholesale electricity trading, interconnector capacity allocation, balancing, security of supply and regulatory cooperation.

More efficient implicit market coupling could allow algorithms simultaneously to allocate electricity and interconnector capacity according to price differences. The UK Government considers this generally more efficient than separately purchasing transmission capacity and electricity.

Ofgem and Interconnector Regulation

Ofgem regulates electricity interconnectors through licensing and investment mechanisms such as the cap-and-floor regime. This model establishes minimum and maximum revenue levels for qualifying interconnector projects, balancing investor incentives with consumer protection.

In November 2024, Ofgem granted cap-and-floor approval in principle to projects including MaresConnect, LirIC and Tarchon, demonstrating continued expansion of Britain's international electricity links.

Ofgem and government are also developing Multi-Purpose Interconnectors, which combine offshore renewable generation with cross-border transmission. In March 2026, Offshore Bidding Zones operating through implicit trading arrangements were identified as the preferred market model for these projects.

Case Name/Citation

R (AQUIND Ltd) v Secretary of State for Business, Energy and Industrial Strategy [2023] EWHC 98 (Admin).

Facts

AQUIND proposed a 2,000 MW bi-directional electricity interconnector connecting southern England with Normandy, France. The project was designed to transmit approximately 16 million MWh annually. The Secretary of State refused development consent, and AQUIND challenged that decision by judicial review.

Legal Issue

The principal issue concerned whether the Secretary of State had lawfully applied planning and infrastructure policy when refusing development consent for an internationally significant electricity interconnector.

Judgment

The High Court found legal defects in the Secretary of State's decision-making and allowed the judicial-review challenge.

Legal Principle/Ratio

Government decisions concerning strategic international electricity infrastructure must comply with public-law principles, relevant statutory planning requirements and applicable policy. Energy-security or infrastructure discretion does not remove the requirement for legally rational decision-making.

Significance

AQUIND demonstrates that international electricity trading depends not merely on commercial electricity markets but also upon domestic planning, licensing and administrative-law approval of the infrastructure enabling cross-border trade.

Case Name/Citation

Commission v Tempus Energy Ltd, Case C-57/19 P, EU:C:2021:663.

Facts

The dispute concerned the UK's electricity Capacity Market and European Commission approval under EU State-aid law.

Legal Issue

The question was whether the Commission was required to initiate a formal investigation because of doubts regarding compatibility of the UK Capacity Market with EU State-aid rules.

Judgment

The Court of Justice overturned the General Court's earlier annulment and upheld the Commission's approach.

Legal Principle/Ratio

Electricity-market mechanisms interacting with interconnected markets may be examined through competition, subsidy and market-access rules.

Significance

The case illustrates how domestic capacity mechanisms can interact with wider European electricity-market regulation.

Conclusion

UK participation in international electricity trading combines physical interconnection, Ofgem licensing, market rules, planning law and international agreements. Post-Brexit arrangements remain more fragmented than EU market coupling, but the negotiations commenced in 2026 indicate movement toward deeper UK–EU electricity-market integration. International electricity trading will therefore remain central to UK energy security, renewable-energy balancing, competition and the transition toward a low-carbon electricity system.