 Dreic115 llawer o ddyfynneенrestu agersonol sydd ag Queen Hesso已 y hops. Greference wyth teis wahanol gyda Lydy Llywun sefydlolaeth dieddwyd ei ASMR. Cymroedd y dyfynneu descend swimmingham Cymru fel Tory Cymru o agersonol cymryd yn Llywun ac mae'r rhaid i Allanodale lŷ pob sgifethig sponsor allan o Caerffordio am bwrdd hwnnw. Rwy ranrefacedoo BSE yn llwyddo aquí wystarrwch tympydd views cyfynnol ac teiswyddiwyr dym ni'n cyfansio ei pobl yn dweud i ddweudon ni, yn gyfreithbetaeth i ddychrau rhywbeth, a'r awgastau cyfansio. Mwysig iawn ar hyn, cyfansio gyda'r ddweud o gwychau cy τι gwaithau i ddweud i ddweudio trio yma. First ly, gweld amno hynny, mae'n pwysig i ddweud cyrff Weinidd Mae'r partyn yn cyfansio ag yma, ddweud eitha'r oedraeth i ddweud i ddweud i ddweud i ddweud i gyd, As we look to build new interconnectors, we have to look at what's appropriate for those. A number of things to consider here. What's the right size for interconnection? The right location? What's the right time to build them? How do we encourage the right returns on investment? How do key parties across Europe work together to ensure optimisation across the European scene as a whole? I'm going to talk very briefly about each of these areas over the forthcoming slides. I'm actually going to start with the challenges of new interconnector build and then move on to look at market operation, which has actually been covered a little bit this afternoon. So, hopefully I can walk through that fairly quickly. So, it would seem fairly obvious, I think, that a common regulatory approach across Europe would be a prerequisite to getting new interconnectors built. For us in the GB that's got fairly severe implications, licence separation in GB means interconnector projects are justified solely on the basis of congestion rents covering investment and operating costs. For this reason, all new GB interconnectors require exemption from the third package, particularly the use of revenue clauses, and exemptions aren't available to TSOs. So, this really key difference between the GB regime from all other European regulatory regimes has created a significant barrier to interconnector development. The exemption criteria and other third package requirements including TSO coordination and harmonisation of arrangements have led GBs to look very closely at the interconnector regime. Broadly, it's looked at four models. Looked at the truly merchant model, uncapped, not available to TSOs, and given the commission's appetite to grant exemptions, this is no longer really a viable option. It is, however, broadly how the GB end of the French interconnector works. Then we move to an exempt regime, which is basically a regulated cap. So, for instance, the Brit-Med interconnector, the interconnector between Holland and the UK is exempt. There's a cap on the revenues, but there is no flaw. The third model, the regulated cap on the floor. This is a model where a proportion of the investment is driven by market testing, but consumers bear the upside as well as the downside in recognition of the wider socio-economic benefits of interconnection, and that's the model which is currently progressing. Fully regulated model, which most of our continental partners develop their interconnectors by, investment costs are included in the wrap. There may be some incentives on availability, but by and large there's no exposure to revenue volatility. So, the cap and floor regime is being developed using actually the Belgian UK interconnector, the NEMO project as a pilot. Initial principles were sent out by the regulators just before Christmas. Detail actually still to be worked up, but we expect this regime to apply to all our regulated interconnectors going forward. It's important to add that it is still open for third parties to build truly merchant interconnectors to GB if they want to do so. So, what about capacity and location? Really important that you look at these projects in the entirety. You can't just consider the offshore cable. You've got to look at the onshore reinforcement that's necessary as well. Now, it's no doubt that interconnected development is hugely challenging, and the choice of location and size is a balance of many factors that play out there. Location for converted sites is usually in very well-developed coastal areas. The consents for both onshore and indeed for the offshore work is typically in environmentally sensitive areas, and they're connecting at the edges of the transmission networks where spare capacity is limited, and that leads to the need for greater reinforcement onshore. So, funding and investment is also a key consideration, as I've alluded to, but times are changing here. With the provisions of the third package for greater TSO co-operation reflected in the cap and floor regime, and the achieving of the wider policy goals that I talked about at the outset of Firmain, interconnectors do now need to be built for wider socio-economic benefits, rather than solely with the interests of developers in mind, and this has led to some fairly major changes. Right size has to be taken into account. That takes into account price convergence versus maintaining an arbitrage advantage over the interconnector. Right location, as I've alluded to, optimising the total project costs, offshore cable, onshore reinforcement. Particularly important now in GB, given the removal of locational signals provided by the transmission network use of system tariffs. And this may lead to some very complicated cost-benefit sharing as we move forward. So, absolutely vital that there's a huge degree of co-ordination as we move forward. None of this will happen unless we've got co-ordination between all the relevant parties, and there are lots of parties in play here. Commission with enabling tools like the energy infrastructure package to promote greater interconnection between countries. Member states need to enact the legislation to facilitate that development. ASA, responsible for development of the framework guidelines and the network codes, which they pass on to the ESOs to develop, also really got a major part to play in aligning the regulatory regimes across Europe. National regulators obviously come into play, and we've seen in GB that the GB regulator has been investing a lot of time to try to bring the GB regime more into line with its European counterparts. Obviously, as well, a huge part for the TSOs to play, as they are responsible for actually building these interconnectors. Of course, there may also be third-party developers in the mix who are also vital to that increasingly interconnected picture that you see there on your slide. Next slide. Not to be outdone, I've also got this slide as well. So, I will not go through it because it's been gone through quite a bit today. I think we've all realised that there is now a greater degree of separation between the forward markets and the day ahead implicit auctions, and that the NWE initiative actually hopes to have the intraday solution enforced by the end of this year, and that will incorporate a large part of the European scene. Capacity is currently traded on the French interconnector through explicit auctions. That's annual, monthly, daily, hourly, etc. The daily explicit auctions on the French interconnector will be replaced by the NWE implicit auctions, and we're already in the process of changing those systems to enable GB to plug into the NWE model. So, lastly to real-time operation, another fundamental point if we're going to satisfactorily integrate increased interconnection into our markets. Cross-border balancing went live on the French interconnector in December 2010. Service was developed as part of a wider strategy of FOUI, that's the French, UK, Ireland Regulatory Forum set out in the third energy package. This bilateral service consists of both TSOs exchanging 10 upward and 10 downward prices for every hour of the day. Broadly, its purpose is to provide a balancing tool to vary the final post-gate flow on the interconnector to benefit consumers in both countries. A service on the French link has been shown to provide a tool by which TSOs can optimise the system at least cost. We believe that such a system of operation is currently what's envisaged by both NSOE and the ASA framework guidelines which are being developed. So, my final slide, really just to reiterate, a huge amount of opportunity out there. You've seen that from the earlier presentations this afternoon, just an enormous amount to be done. As Daniel said, we could also very gratefully receive CVs as well. It is vital that we co-ordinate across those national boundaries. It's vital at this early stage of getting that market up and running that there's great cross-border co-ordination. We've got to work on and lead with the regulators and the policy makers in our respective jurisdictions and more broadly across Europe. We've got to inform and go in tandem with our partners and indeed the customers and communities which we serve. Exciting times, lots of challenges there for the taking. Thank you very much.