• Energy Research
• 13. Climate action close

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.

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.

Hydrogen can be key in the energy system transition. We investigate the role of offshore hydrogen generation in a future integrated energy system, and its interaction with other system elements. By performing energy system optimisation in a model application of the Northern-central European energy system and the North Sea offshore grid towards 2050, we find that offshore hydrogen generation may likely only play a limited role, and that offshore wind energy has higher value when sent to shore in the form of electricity. Forcing all hydrogen generation offshore would lead to increased energy system costs (9-28 b\EUR2016/year by 2045). Under the assumed scenario conditions, hydrogen generation - both onshore and offshore - follows solar PV generation patterns. Combined with hydrogen storage, this is the most cost-effective solution to satisfy future hydrogen demand. Overall, we find that the role of future offshore hydrogen generation should not simply be derived from minimizing costs for the offshore sub-system, but by also considering the value that such generation would create for the whole integrated energy system. Based on our results, a stronger political effort to promote the integration of offshore wind in onshore energy markets via electrical connection is called for.

Wind energy is anticipated to become a backbone of the future energy system. Ageing wind turbine fleets, increasing land-use constraints and rising relevance of societal factors make the deployment of land-based (onshore) wind energy ever more complicated. Consequently, repowering is expected to become a rapidly growing point of focus for the wind industry. Here we propose a more holistic and socially informed project-level approach to analyse repowering activity that enables a more robust understanding of the process and potentials. We demonstrate that for wind pioneer in Denmark, only 67% of the capacity removed in repowering projects was related to the physical space needed for a new turbine. Other factors that drive repowering include regulation (for example, noise-related, 8–17%), development principles (for example, aesthetics, 7–20%) and political bargaining (4–13%). The recognition of repowering as a negotiated process between host communities and wind developers will probably be critical to unlock the full potential of wind energy in the future. As wind turbines age and wind fleets expand, their replacement becomes increasingly complex. Kitzing et al. analyse turbine repowering activity in Denmark holistically, uncovering a range of factors that affect repowering decisions beyond physical space that need to be considered carefully.

AbstractThe costs of wind power have declined to levels on par with or below those of conventional sources in many parts of the world. Wind power has become one of the fastest‐growing sources of new electricity generation. We take stock of wind power cost evolution over the past 20 years, review methodologies commonly used for cost assessment, discuss the potential for continued cost reduction, and identify anticipated cost and value drivers. Our scope includes both onshore and offshore wind technologies. We draw from a vast body of literature on these topics to highlight key trends, approaches, and limitations. Furthermore, we discuss strategies for wind power assets to enhance their marginal economic value to the broader power system and consumers. We identify a myriad of factors that are expected to influence the future cost and value of wind power, including siting, project scale, turbine size, operational synergies, commodity prices, advancements in turbine technologies, enhanced management of the wind resource, and novel control technologies that provide value for the electricity grid. Because the common methods for forecasting future costs each have their own strengths and weaknesses, we find the best insights are elicited from a combination of methods. Overall, researchers and analysts anticipate further sizable cost reductions for onshore and offshore wind. Midrange forecasts for levelized cost of energy in 2050 are generally between $20 and $30/MWh for onshore wind and $40 and $60/MWh for offshore wind, a reduction to approximately half of today's levels. Optimistic forecasts anticipate these levels as early as 2030.This article is categorized under: Wind Power > Economics and Policy

We analyse quantitatively how risk exposure from different support mechanisms, such as feed-in tariffs and premiums, can influence the investment incentives for private investors. We develop a net cash flow approach that takes systematic and unsystematic risks into account through cost of capital and the Capital Asset Pricing Model as well as through active liquidity management. Applying the model to a specific case, a German offshore wind park, we find that the support levels required to give adequate investment incentives are for a feed-in tariff scheme approximately 4-10% lower than for a feed-in premium scheme. The effect of differences in risk exposure from the support schemes is significant and cannot be neglected in policy making, especially when deciding between support instruments or when determining adequate support levels. International Journal of Sustainable Energy Planning and Management, Vol 7 (2015)

Dynamic pricing of retail electricity, as opposed to the widely applied average pricing, has often been proposed to enhance economic efficiency through demand response. The development of variable production from renewable energies and expectations about the installation of heat pumps and electric vehicles has now reinforced interest in flexible demand and dynamic pricing. With a roll‐out of smart metering one important technical hurdle is going to be cleared, and dynamic retail pricing may soon become an eligible option for many households. We quantify the potential incentives to adopt new pricing schemes using exemplary Danish data. Until now, limited activity of household consumers on retail markets indicates that switching supplier or contract is perceived costly. We apply the concept of switching costs to explain this hesitant behavior, and use it to estimate a threshold level based on recent observations in the Danish market. We calculate potential savings from dynamic pricing and show how the choice of electricity taxation technique may hamper or enhance potential benefits. In the light of switching costs, our results suggest that the combination of smart meter roll‐out and dynamic pricing offerings might be insufficient to convince the majority of households to switch contracts and become active in response to prices, unless they hold a substantial flexibility potential. Dynamic taxation, even if applied to parts of the levies, could contribute significantly to inducing flexible consumption. WIREs Energy Environ 2018, 7:e270. doi: 10.1002/wene270.This article is categorized under: Energy Infrastructure > Economics and Policy Energy Systems Economics > Economics and Policy Energy Policy and Planning > Economics and Policy