A European Green Deal

How offshore wind can help
decarbonise Europe

Table of Contents
  1. Foreword
  2. Introduction and summary
  3. A green deal approach to offshore wind buildout
  4. Finding the space
  5. Transporting the offshore wind energy to Europeans
  6. Enabling the industry to scale
  7. Conclusion
  8. Get in touch with the authors
  9. About Ørsted

Transporting the offshore wind energy to Europeans


Areas with a high resource potential for renewable energy, such as good wind and seabed conditions, are not distributed according to where the future consumption of electricity will be.


Trading electricity from the large production centres, e.g. the North Seas to the large consumption centres in central Europe will create socio economic value and lower electricity prices. This will require an increase of transmission capacity across Europe.

The existing transmission grid is not ready to seamlessly facilitate the trade of electricity across borders and to bring the power generated from 450GW of offshore wind capacity to European consumers and industry. Doing so will require new export cables to take the energy to shore, more interconnectors between markets and more onshore transmission within countries. But in recent decades, the expansion rate of the European power grid has almost ground to a halt.

Annual buildout of 220-400kV transmission

Km per year

Source: ENTSOE. Countries incl.: AT, BE, CH, DE, ES, FR, IT, LU, PT, DK, FI, IS, NO and SE

New technologies, such as battery storage and automated demand-response, together with an optimised operation of the existing infrastructure, including the European gas grid, might reduce or postpone the need for this transmission buildout. But the potential of these options is not expected at the scale necessary to remove the need altogether.

To cost-efficiently transport the energy to European citizens and industries, it is important to plan the future offshore wind deployment in connection with the offshore and onshore grid buildout, in order to maximise potential synergies. In the political and planning process, three questions must be answered:

  • How do we ensure the adequate and timely buildout of transmission infrastructure?
  • How do we coordinate the buildout of the offshore transmission grid?
  • How do we allow for competition to reduce costs?

 

How can we ensure an adequate and timely buildout of transmission infrastructure?


Transmission projects are complicated to plan and execute. Even small expansions or reinforcements of the European transmission grid requires years of planning and dialogue with affected stakeholders, before consent is given and the lines are commissioned.


New lines are often planned according to where bottle necks between areas are observed. TSOs seeking to develop new gridlines are typically met with complex approval processes and outdated regulatory frameworks that do not cover new types of infrastructure. And regulations are put in place mainly to secure diligent spending and lowest cost to ratepayers, without considering the long-term need to decarbonise.

In addition, new transmission projects often meet local opposition. The need for transmission, particularly connecting different markets and creating a long-term value through trading between countries, is often poorly explained to those affected, which fuels resistance.

The result is an insufficient transmission buildout rate – meaning potentially higher electricity bills to European energy consumers and ultimately the risk that Europe will have to renege on its ambitions to decarbonise.

Even small expansions of the European transmission grid requires years of planning and dialogue with affected stakeholders

Therefore, we need to make it clear today which kind of transmission grid is needed by 2040 and 2050 – based not on observed congestions but on the expected volumes needed to electrify and decarbonise the European economy.

Short term
Agile approval processes and effective incentives

With lead times for transmission infrastructure upwards of 10 years, regulators, TSOs and the industry can already today start the dialogue on how to prepare for 130GW of offshore wind generation by 2030. This dialogue should encompass planning for both offshore and onshore infrastructure as well as the steps that can be taken to attract the private equity needed to expand the pan-European transmission network.

With regulators on how to create effective incentive mechanisms to unlock increased grid investments. This work should also make sure that Europe’s ambition to fully decarbonisation by 2050 is reflected European policymakers can facilitate the infrastructure expansion by seeking to implement agile approval processes and solutions that are more acceptable to local communities. Policymakers can work in the future assessment criteria for infrastructure projects.

Finally, we need to initiate a broader societal dialogue on the changes brought by the energy transformation. Here, policymakers play a special role in explaining the necessity for a new infrastructure on land.

We need to make it clear today which kind of transmission grid is needed by 2040 and 2050

Long term
Complete the Energy Union and establish a strong European ‘backbone’ grid

A truly integrated energy market will facilitate the transport of energy from offshore wind farms to the consumption centres in central Europe.

Towards 2050, the expansion of the European transmission grid should continue well in time to be able to bring 450GW of offshore wind energy to energy consumers in central Europe. This can be supported by regional buildout plans – including plans for energy hubs in the northern seas, where several windfarms are connected to a large platform, from which the energy can more efficiently be sent to shore, decreasing the need for landing points and offshore cables.

 

How do we optimise the value of the offshore transmission grid?


In most markets, offshore wind generation is expanded ‘inside out’, starting with smaller wind farms close to shore, then expanding outwards with larger wind farms built in deeper waters.


At the same time, interconnectors are built in parallel, but not always coordinated with the offshore wind projects.

This approach comes with the risk of too high investments, as the full capacity of export cables or interconnectors is rarely used. By combining offshore wind farms with interconnectors, making them in essence ‘multilinked wind farms’, there are very substantial synergies and cost savings.

Optimised planning of infrastructure will also decrease space needed for transmission – and avoid the so called ‘spaghetti-problem’, i.e. offshore transmission lines intersecting.

 

Multilinked wind farms increase welfare

Page 1

Historical approach: One offshore wind farm – one export cable. Interconnections between markets planned separately.

Page 1

Multilinked approach: Offshore grid and wind farms planned and built together, combining export cables and interconnectors to multilinked offshore wind farms.

These cost-efficiencies can be even greater, if multilinked offshore wind farms are combined with optimised localisation of future power-to-X plants, as this leads to substantial system benefits and reduced transmission needs. Together, the required interconnector in 2050 can be reduced by 20%, compared to a scenario without multilinked wind farms and without redistribution of power-to-X products, the study suggests.

In other words: through means of building multilinked wind farms and power-to-X production, the interconnection requirement can be reduced by as much as the entire stock of current European interconnections. Such coordination sounds simple. But even today, planning and constructing offshore transmission lines takes years of analysis and consenting before construction even begins. Add to this several actors, potentially operating under different regulatory conditions, who must agree on both the technical specifications and timing of a project, and the simplicity is diminished.

The necessary coordination between national system operators and offshore wind developers can be realised through a step-wise approach. By gradually increasing complexity, actors can build on regulatory and technical learnings, thereby also allowing offshore transmission and interconnectedness to follow the buildout of offshore wind energy organically.

Multilinked offshore wind farms is the first step towards more complex joint development of transmission and offshore wind energy

Complexity / scale (illustrative)
Seperate interconnectors and offshore wind farms
Multilinked projects
Cluster
Meshed network/islands

Short term
Tender five relevant multilinked offshore wind projects

In practice, such cooperation can start by member states bilaterally identifying at least five promising sites for multilinked projects, where offshore wind farms can be combined with interconnectors between markets, and where there is space to expand into larger clusters. These five projects could be built by offshore wind developers following a competitive auction.

Long term
Build on experience and increase complexity

Building on the learnings from the first multilinked projects, governments can begin to work towards more complex solutions. For instance, offshore wind energy clusters with shared transmission hubs, or even hubs situated on interconnectors. Eventually, this growing project and regulatory experience will allow for a more complex meshed network of hybrids, hubs and even islands to emerge during the late 2030s and 2040s.

 

How do we allow for synergies and competition to reduce cost


For modern offshore wind energy, offshore substations and export cables typically make up some 20-25% of the total cost of energy today. While a few European countries, such as the UK, include the offshore transmission in the scope of the offshore wind energy tender, most European countries, assign construction of the offshore connection cables to the national TSO.


Comparing, for instance, transmission of offshore wind projects in the UK and Germany suggests submitting the full scope of a project to competition is a more cost-effective way. A study by Ørsted has found assets built by private developers come at 28% lower costs – or about EUR 10 per MWh – compared to assets built by a TSO. This is in large part due to synergies in planning and building the export cable and the offshore wind farm together.

Going forward, as offshore wind farms are built farther from shore, interconnectors and export cables based on High Voltage Direct Current (HVDC) technology will become increasingly common, and eventually the standard for offshore grids. This technology is not new in itself, but it is new to use it at such a large scale offshore, and in complex interconnected solutions.

Fortunately, the factors that made offshore wind generation cheaper than building new fossil power plants can also help reduce the cost of offshore HVDC technology: industrialisation, scale and competition.

Offshore transmission developed by TSO’s mean competition driven cost reductions go untapped

EUR/MWh

If a clear pipeline of projects is established, it will allow the industry to invest in order to industrialise its supply chain. Combined with effective competition, this can squeeze out costs and ensure standardisation and constant technological improvement. Hence, European policymakers should strive to unlock competitive forces to ensure the continued development of new technology and drive the cost-out journey of existing and new offshore grid technology.

Short term
Subject the transmission of offshore wind projects to competition

Governments seeking to expand offshore wind generation should consider how best to apply competitive pressure to every aspect of future projects, including screening sites and constructing transmission assets.

Long term
Allow private developers to screen for new projects

Eventually, a new regulatory model for offshore wind energy and transmission that ensures remuneration and allows private developers to propose and construct multilinked projects in their own right might be beneficial – The transmission assets would then be owned and/or operated by TSOs or third parties.

New trends in Europe’s infrastructure buildout

Replacing the bulk of Europe’s power generation from centralised production with solar and wind generation, whilst also replacing fossil fuels in transport, industry and heating through direct and indirect electrification, will require a lot of additional infrastructure. Not least to distribute the 450GW of offshore wind generation.

But not all new infrastructure will be ‘more of the same’. Maturing technologies, such as HVDC and power-to-X can share the load with onshore transmission lines and change the face of the future infrastructure expansion.

To better understand the underlying dynamics and economics of the future infrastructure expansion, EA Energianalyse has on behalf of Ørsted conducted a study of how best to increase transmission capacity. The study models a decarbonisation of Europe towards 2050, based on assumptions derived from the EC’s 1.5 TECH-scenario.

The study finds that combining the offshore wind generation with transmission is the most cost-efficient way to build offshore wind generation in the future. Such multilinked projects result in higher utilisation of the cables leading to a lower unit cost and fewer connection points to the onshore grid are needed. Furthermore, moving a larger share of the transmission offshore reduces demand for onshore infrastructure, leading to fewer communities being impacted by the buildout across Europe. In fact, the study’s modelling results suggest that ‘simple’ offshore transmission lines are no longer the default option after 2030.

Combining offshore transmission with offshore wind generation and eventually developing these into offshore power hubs, will become a more cost-efficient option. This will especially be the case if HVDC follows the same cost-out trajectories as HVAC transmission. This is likely, as the supply chain ramps up and innovation helps reduce the weight of substations and converters.

Towards 2050, a large share of the increased power demand is expected to come from the growing power-to-X sector that will decarbonise large parts of the transport-sector and industry. With future cost reductions from scale, it will be cheaper to produce renewable hydrogen closer to the large wind resources in North west Europe and to then transport the product to the place of demand. This will further reduce the need for onshore transmission buildout as well as reduce the overall investments needed to decarbonise Europe.

  

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Enabling the industry to scale

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