Research

Economic considerations on the regulatory framework for offshore wind and offshore meshed grid investments: 3.1 Policy and Regulation

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Abstract

One of the main technologies for renewable power production, offshore wind electricity (OWE) is an integral component of decarbonising the European power sector. The costs of OWE highly depend on the regulatory frameworks for the provision of wind farms and offshore grids. Regarding generation investment, the distribution of decisional responsibilities and risks between the generators and the regulator is vital for a costefficient deployment of offshore wind farms (OWF). Targeted OWE instruments which offer predictable revenues to generators promise significant advantages over decentralised approaches based on the Energy-only market concept. Putting out contracts for building and operating OWFs in locations predetermined by the regulator to competitive tender, appears to be a suitable approach in many cases. A coherent regulatory framework for meshed grid investments must address network expansion requirements in a cost-efficient manner. In this context we recommend considering four elements: firstly, the harmonisation of the methods for distributing connection costs between transmission system operators (TSOs) and OWE generators; secondly, sharing network development expenses between the involved TSOs in a transparent way; thirdly, similar grid access tariffs for OWE operators; and fourthly, establishing a coherent regulatory regime for the TSOs’ cost recovery at the offshore meshed grid level. Future regulatory frameworks for offshore meshed grid will require a strong engagement of policy makers and regulators. The role of European institutions to pave the way to stable and harmonised institutional frameworks is critical. This report presents the main findings of three comprehensive working papers developed within the scope of Baltic InteGrid (Integrated Baltic Offshore Wind Electricity Grid Development), an interdisciplinary Interreg research project, bringing together experts from Member States present in the Baltic Sea Region to coordinate the implementation of these policy objectives. The goal of the Baltic InteGrid project is to track current regional, national, and European energy developments and propose recommendations to optimise regulatory frameworks.