• Energy Research

This presentation was part of the EERA JP Wind SP8 WORKSHOP on Future market arrangements for large-scale offshore wind energy development in the European Seas (June 10).

Offshore grids can play key roles in the transition of energy systems toward sustainability. Although they require extensive infrastructure investments, they allow for the exploitation of additional resources and may be important in providing for part of the increasing electricity demands driven by sector coupling. This paper quantifies the socioeconomic value of offshore grids and identifies their major drivers, performing energy system optimization in a model application of the northern–central European energy system and the North Sea offshore grid towards 2050. The increasing wake loss with the sizes of hub-connected wind farms is integrated in the modeling. We find that without sector coupling no offshore grid may develop, and that the higher the level of sector coupling, the higher the value of offshore grids. Therefore, it can be strongly stated that offshore grid infrastructure development should not be discussed as a separate political topic, but seen in connection to sector coupling.

Studies of the aggregated hourly electricity load in geographical areas typically show a systematic variation over the day, the week, and seasons. With hourly metering of individual customers, data for individual consumption profiles have become available. Looking into these data we show that consumption profiles for specific categories of customers are equally systematic but quite distinct for different categories of customers. That is, different categories of customers contribute quite differently to the aggregated load profile. Coupling consumption profiles with hourly market prices which also include a systematic component in the hourly variation, we show that customers with different consumption profiles experience different average cost of their electricity consumption when billed according to hourly time‐of‐use prices. Thus, some categories of customers stand to gain from time‐of‐use pricing, while others stand to lose. In Denmark, typically industry, private services and households stand to lose, whereas agriculture and public services stand to gain from time‐of‐use pricing. However, differences within categories of customers are considerable and, for example, industrial companies running 24 h a day tend to gain from a time‐of‐use pricing. WIREs Energy Environ 2014, 3:582–593. doi: 10.1002/wene.120This article is categorized under: Energy Infrastructure > Economics and Policy Energy Policy and Planning > Economics and Policy

Offshore grids, with multiple interacting transmission and generation units connecting to the shores of several countries, are expected to have an important role in the cost-effective energy transition. Such massive new infrastructure expanding into a new physical space will require new offshore energy market designs. Decisions on these designs today will influence the overall value potential of offshore grids in the future. This paper investigates different possible market configurations and their impacts on operational costs and required congestion management, as well as prices and emissions. We use advanced integrated energy system optimisation, applied to a study case on the North Sea region towards 2050. Our analysis confirms the well-known concept of nodal pricing as the most preferable market configuration. Nodal pricing minimises costs (0.2–1.6 b€/year lower) and CO2 emissions (0.6–5.6 Mton/year lower) with respect to alternative market designs investigated. The performance of the different market designs is highly influenced by the overall architecture of the offshore grid, and the rest of the energy system. E.g., flexibility options help reducing the spread between the designs. But the results are robust: nodal pricing in offshore grids emerges as the preferable market configuration for a cost-effective energy transition to carbon neutrality.

Abstract The recent rise of auctions to allocate support payments for renewable energy projects creates new uncertainties during project development and causes a decrease in support levels. We investigate the effects of the shift to auctioning on costs of capital (CoC) and financing conditions through semi-structured and focus group interviews with 40 experts in onshore and offshore wind project development and financing in Europe. We find that auctions create a competitive environment that pressures the industry into accepting higher risks and lower returns. Banks have reduced debt margins, while large investors decreased hurdle rates and equity returns, despite additional risks from auctions, such as uncertainty about future award prices, allocation and qualification risks. The risk of being awarded support and incurring sunk costs makes smaller bidders averse to participating in auctions. Competitive bidding may also decrease secured revenues and increase offtaker risks, especially when combined with sliding premiums. Despite increased price risk, the competitive pressure driven by project sponsors, seems to lower financing costs and hurdle rates, thus decreasing CoC for offshore projects. To reduce negative impacts on CoC and financing, policymakers can minimise additional risks, by adopting remuneration schemes that stabilise revenues, and supporting smaller actors through removing participation hurdles.

This is the software and data set named "Supplementary Software 1" for the research paper "Offshore wind competitiveness in mature markets without subsidy". Please refer to the README file in the ZIP file for instructions. The paper is currently under review and access is for peer-review purposes only. Bundesministerium für Bildung und Forschung under project reference FKZ 01LA1821A. BTU Cottbus-Senftenberg for a postgraduate scholarship (GradV).