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Offshore Grids: Towards a least regret EU policy

October 2013

The Network Industries Quarterly

 

Co-authors: Leonardo Meeus (European University Institute), François Lévêque (Mines ParisTech & Microeconomix), Isabel Azevedo(European University Institute), Marcelo Saguan (Microeconomix) and Jean-Michel Glachant (European University Institute, Florence School of Regulation).

 

The objective of the 5th report of THINK has been to formulate policy recommendations to the European Commission (DG Energy) on offshore grids, and this brief is derived from that report.

The development of an offshore grid is able to play a significant role in the accomplishment of the EU energy and climate objectives. The total installed capacity of offshore wind farms is expected to increase from the existing 3 GW to about 40 GW by 2020. The number one priority project in the recently proposed EU infrastructure package is the Northern Seas offshore grid.

There are two possible offshore grid developments: there could be a multiplication of standalone lines, which already exists today; or there could also be a transition towards combined solutions, which requires more advanced grid technology than what is currently on the shelf. The first would correspond to an increase of shore to shore investments to exchange energy across borders or to relieve congestion within an onshore grid, and an increase in farm to shore investments to connect offshore wind farms to the existing onshore grid. The second instead would imply mixed investments, combining the connection of offshore wind farms with the creation of interconnection capacity.

The potential for EU added value depends on which of these alternative offshore grid developments will prevail. The economic case for combined solutions is still uncertain, but regulation needs to be proactive to avoid compromising this possible offshore grid development. It means that we have to address the fact that the currently mainly national regulatory frames for farm to shore and shore to shore investments are unsound, and the difficulties to design and develop combined solutions are tremendous.

We recommend the European Commission to take initiatives to:

  1. harmonize into economically sound regulatory frames for offshore transmission investments;
  2. harmonize the renewable support schemes for offshore wind farms;
  3. facilitate the ex-ante allocation of costs and benefits of offshore transmission investments;
  4. speed-up offshore grid technology development;
  5. adapt the Community-wide transmission planning to offshore grids, while also allowing regionalized solutions for the implementation of some of these remedies.

A least regret EU policy on offshore grids indeed also implies giving a chance to regional initiatives, such as the North Seas Countries’ Offshore Grid Initiative.

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