A North Sea offshore grid governance model

Abstract

EU climate goals force EU member states to increase the share of renewable electricity generation in their respective electricity markets. To reach these climate goals, offshore wind energy is regarded as one of the main technologies that can contribute to a full transition towards a fossil-free electricity system. Furthermore, 230 Gigawatts (GW) of offshore wind is projected to be necessary within the EU. Additionally, the EU has the objective to further integrate electricity markets within its member states. This further integration will therefore need a substantial increase in interconnection capacity between the current electricity markets. Both the increase in offshore wind energy and the increase in interconnection capacity will require offshore electricity transmission infrastructure.

Currently, offshore wind generation is connected through individual (radial) offshore grid connections and interconnection capacity used for cross border trade is still developed through point-to-point interconnection. However, a meshed offshore grid (MOG) can combine the aforementioned functions of evacuating offshore wind and interconnect electricity markets. Additionally, a MOG is expected to provide additional economic benefits compared with the individual development of offshore wind farms (OWF) grid connections and the interconnection capacity between electricity markets. While a MOG can provide potential economic benefits, current development of a MOG is still lacking, caused by a variety of economic and regulatory knowledge gaps that need to be addressed. One of these knowledge gaps is which governance model, that allocates the responsibilities regarding the ownership and operation of such a MOG, is preferable for coordinated offshore grid developments. This research project is therefore focussing on this knowledge gap.

In order to address this gap, an analytical framework is created through a literature review and desk research that provides both a foundation to conceptually develop the design space of a governance model, while also providing the tools to analyse the expected performance of a governance model. Additionally, a quantitative comparative analysis of currently applied governance models for individual OWF grid connections is performed to provide input for the analysis of governance models that can be applied for a MOG.

Through the design space, four different governance models were constructed and analysed, based on the analytical framework. Three of the constructed governance models rely on long-term contracts and further unbundling of electricity grid activities (being electricity transmission and system operation), while one governance model (the TSO model) relies on regulation and bundling of the electricity grid activities. The analysis of these governance models shows that there is no optimal governance model. However, to facilitate the efficient deployment of a MOG, the TSO model is considered most preferable, as this governance model is able to facilitate the gradual development of a MOG, while also facilitating efficient operation by limiting coordination issues that can arise due to unbundling. This model will rely on current owners of the TSOs to provide the necessary investment capital and it remains to be seen whether these owners have the willingness to do so, provided the enormous scale of investments to reach EU climate goals.