The North Seas grid is a key strategic element in achieving an integrated and interconnected European Energy Union and needs stronger political support, 26 energy companies including utilities, vendors, consultants and industry associations have argued in a letter to European Union energy ministers.
Alongside this letter, consultants E3G, one of the signatories, has also set out proposals in a new briefing paper aimed to give momentum to the development of the North Seas grid.
Proposal for North Seas grid
The development of a North Seas grid had its origin in a 2009 declaration by 10 European countries – Belgium, Denmark, France, Germany, Ireland, Luxembourg, Netherlands, Norway, Sweden and UK.
The so-called North Seas Countries’ Offshore Grid Initiative (NSCOGI) was conceived to advance interconnection between these countries and to facilitate access to in particular the large offshore wind capacity that is now well under development. [Engerati-Europe’s Offshore Wind Market Levels Off]
The EU Intelligent Energy Europe (IEE) supported OffshoreGrid project, which was completed in 2011, provided the first in-depth analysis of how to build a cost-efficient meshed grid in the North and Baltic Seas. Two models were proposed. These are a ‘direct design’ in which the grid is built on interconnectors between countries and electricity markets, and a ‘split design’ in which the grid is designed around the planned offshore wind farms. Of these the latter was estimated as marginally more cost effective.
NorthSeaGrid project findings
This has been followed with the recently completed IEE-supported NorthSeaGrid project, which investigated three specific case studies using a combination of these design models. These are interconnections via a German windfarm between Germany, the Netherlands and Denmark, interconnections via Belgian windfarms between UK, Belgium and the Netherlands, and an interconnection via a UK Dogger Bank windfarm between UK and Norway.
Among the findings are positive estimated system benefits for the German Bight and UK Benelux cases (respectively €34-64 million and €30-141 million) primarily driven by the increased level of interconnection between the countries. However, for the UK Norway case, there is a small reduction in the capacity leading to a marginal increase in the system cost (system benefit €-2-1 million). An asymmetric impact is also noted on consumers and generators across regions, with some potentially obtaining benefits in the form of lower electricity prices, increased generation and network revenue, but others potentially facing increased costs and reduced profits.
Integrated approach to construction
The study found that an integrated approach to construction would generally lower the material requirement and costs. It also recommends that ‘Positive Net Benefit Differential’ methods be utilized by countries for allocating the costs of shared projects, and the Agency for the Cooperation of Energy Regulators (ACER) is recommended to give attention to speeding up the implementation of EU regulation and network codes at national level. Regulatory barriers include grid access responsibility and the design of offshore windfarm shore connections.
From a policy perspective the study indicates a strong case for standardization of offshore grid solutions, and the potential of bilateral or multilateral collaboration mechanisms involving wind farm developers, transmission system operators and regulators to help bring about such projects.
Push for North Seas grid
In their letter the energy companies note that offshore wind in Europe’s northern seas has the potential to generate over 8% of Europe’s power by 2030, reducing dependence on imported fossil fuels and enabling large scale industrial activity and high-skilled employment in a wide variety of ports and cities. Further, there is a well-developed investment pipeline of over €100 billion by 2030. This includes several major UK offshore windfarms. [Engerati-Offshore Windfarms Set To Reach New Levels]
Coordination on planning and building a regional offshore grid infrastructure, market access and reserve sharing in the North Seas region could lead to cost savings of €5-13 billion per year by 2030 through a better integrated and more competitive regional market, say the companies. However, they are concerned that references to the collaboration were left out of the final text of the EC’s Energy Union strategy framework. [Engerati-European Energy Union Proposed To Transform Energy System]
The companies call on the energy ministers for:
1. Endorsement of the North Seas Offshore Grid as a key focus for enhanced regional cooperation as part of Europe’s Energy Union
2. A proposal to agree on a legal framework during 2016 in the form of an Intergovernmental Agreement that defines a shared North Sea electricity strategy
3. A proposal for establishing a multi-country Investment Platform for the North Sea in order to increase the visibility of the project pipeline, attract private and institutional investors, and enable a lower cost of capital.
In its position paper E3G alongside a new mandate and strategy for the implementation of the North Seas grid, also calls for a high level ‘project team’ of 3-5 high-level individuals to be built upon the existing NSCOGI in order to broker the necessary ministerial agreements. Key objectives would focus on the legal framework, strategy coordination, and regional network development; financing through a special purpose vehicle; and market design.