North Seas Grid:
Key conclusions from E3G scoping study
May 2012
Contact: Jonathan Gaventa – jonathan.gaventa@e3g.org
E3G - Third Generation
Environmentalism
Summary
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The value case for a North Seas Grid arises from:
– Creating long-term options for deep decarbonisation in North Seas region
– Demonstrating the viability of large scale infrastructure for decarbonisation that can be
replicated elsewhere (e.g. Medgrid, Turkey interconnector, etc)
There is broad political support for the concept but it has not yet been fully tested. New
momentum and leadership will be necessary to animate the process.
The technological, regulatory and financial challenges are complex but are likely to be
manageable if there is sufficiently clear political direction. Issues of market access and
liabilities for offshore RES developers will need to be proactively addressed.
While agreement of a full blueprint is neither feasible nor necessary at this stage, the next
18 months will be critical for securing:
– A renewed political commitment among ‘leadership clusters’ of countries willing to
move forward more quickly
– A firmer institutional basis for the project through a new mandate for the North Seas
Countries Offshore Grid Initiative
– Agreement to early projects to test the technology and regulatory arrangements, and
financing mechanisms to support early deployment under the European Energy
Infrastructure Regulation and Connecting Europe Facility
E3G - Third Generation
Environmentalism
Contents
Project background and methodology
Value case
Underlying choices
Political landscape
Policy, regulation and finance
Key conclusions
E3G - Third Generation
Environmentalism
Project objective and key areas of focus
Value case
Objective:
• To scope the political,
institutional, financial and market
pathways for the construction of a
North Seas power grid consistent
with long term decarbonisation
objectives
• To identify potential involvement
for E3G, ECF and related
climate-focused organisations
Timelines
and
pathways
Venues
and actors
Political
choices
Policy
conditions
NSG
scoping
study
Regulatory
framework
Energy
system
drivers
Countrylevel
drivers
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Technology
options
Key inputs to scoping project
Activities and inputs:
~ 100 meetings and interviews with key stakeholders
including:
• Current or former ministers from Belgium, Denmark,
Germany, Ireland, Germany, UK – plus members of
parliament, energy ministries etc
• DG Ener, DG Clima, Baroso Cabinet
• ACER and national regulators;
• ENTSO-E and national TSOs
• Technology companies, cable manufacturers, power
generators, RES developers
• NGOs, academics, thinktanks
Literature review and analysis papers on technology,
regulation and national drivers
Roundtable workshop to test emerging conclusions
E3G - Third Generation
Environmentalism
Contents
Project background and methodology
Value case
Underlying choices
Political landscape
Policy, regulation and finance
Key conclusions
E3G - Third Generation
Environmentalism
Infrastructure and decarbonisation
Centralised
Large scale
transmission to
access new sources
of renewable and
low carbon
generation and
facilitate system
balancing
Centralised
Diffuse
Smart grids to
integrate
decentralised
generation and to
activate the demand
side
Energy efficiency
deployment to
manage and reduce
energy demand
All three areas face significant delivery challenges. Risk management is needed
across different infrastructure types to secure decarbonisation goals
E3G - Third Generation
Environmentalism
North Seas Grid study starting point
Integrating large amounts of centralised renewable
energy from EU periphery is necessary in many long-term
scenarios for EU decarbonisation
A condition for keeping this option available is adequate
grid infrastructure and effective regulation
North Seas Grid is the most mature proposal currently
underway and could therefore be a pathfinder project for
demonstrating large scale RES and market integration
However, it is unclear to what extent some type of North
Seas Grid would happen with current policies and politics
– and whether this would be consistent with 2030/2050
decarbonisation roadmap
Scoping study therefore aims to examine current state of play and analyse
value and potential for trying to strengthen action on North Seas Grid
E3G - Third Generation
Environmentalism
Contents
Project background and methodology
Value case
Underlying choices
Political landscape
Policy, regulation and finance
Key conclusions
E3G - Third Generation
Environmentalism
Key underlying choices identified include extent of
forward commitment to technology outcomes and
level of regional or European cooperation
Forward
commitment
Solo
Coordinated
Reactive
approach
These choices will be decisive in shaping what form of North Seas Grid is
E3G - Third Generation
possible, but will largely be determined
outside NSG policy processes
Environmentalism
The policy decision space remains relatively
open as the key underlying energy policy
tensions have yet to be resolved
Forward
commitment
Offshore
blueprint
National plan
Solo
Coordinated
Single market
Fragmentation
Reactive
approach
E3G - Third Generation
Environmentalism
However momentum behaviour points to
narrower political space over the near term
Forward
commitment
Offshore
blueprint
National plan
Focus on
options?
Solo
Coordinated
Political drift?
Single market
Fragmentation
Reactive
approach
Focus is therefore needed on early wins, securing options and locking
E3G - Third Generation
in progress rather than
an immediate ‘big bang’ agreement
Environmentalism
In current conditions a phased approach based on
securing options is more likely than a definitive
commitment to an offshore blueprint
2012
2020
2030
Early projects to
test technology
and regulation
National coordination and
offshore hubs
International meshed offshore grid
Continued deployment of point-to-point interconnectors and offshore wind
connections
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[An open question of whether an
offshore
blueprint would be needed in future]
Environmentalism
Policy choices
Current decision space
However, lock in risks are substantial; policy decisions made
over the next few years will have major bearing on final
outcomes
Technology lock in
Regulatory lock in
Design lock in
E3G - Third Generation
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Outcomes
Vicious circles and interdependencies between
decisions are common
Without
expectation of
sufficient future
volumes of
offshore wind, an
integrated offshore
grid will not be
developed
Without
expectation of
economic access
to transmission
and markets, less
offshore wind will
be developed
Without sufficient
expectation of
future demand,
new HVDC/
offshore
technologies will
not be developed
Until new
HVDC/offshore
technologies have
been fully proven,
policymakers are
reluctant to
commit to
deployment
E3G - Third Generation
Environmentalism
Contents
Project background and methodology
Value case
Underlying choices
Political landscape
Policy, regulation and finance
Key conclusions
E3G - Third Generation
Environmentalism
Political landscape – key messages
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Political support for the North Seas Grid is broad but shallow - and has not yet
been fully tested. While there is little active opposition to the NSG concept so
far, new political momentum will be required to secure progress.
Current external political conditions are challenging: economic downturn leads to
lower appetite for long-term policy commitments or regional cooperation.
– However, rapidly changing political landscape. Increasing emphasis on
growth policy provides opportunity to accelerate early projects.
There will be no binary ‘go/no go’ decisions; many of the critical elements will be
determined outside of the North Seas Grid policy arena.
Key decisions will be driven by strategic value case rather than cost minimisation
or decarbonisation concerns (despite the advantages in both of these areas).
While the North Seas Grid has considerable European and regional value,
decisions will be taken on narrower considerations of national interest.
North Seas Grid propositions must be about onshore infrastructure as well as
offshore if they are to be relevant to national energy choices.
The next 18 months provides a key window for locking in decisions.
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Multiple, inter-related decision venues and processes
exist – presenting multiple opportunities but risk of
fragmentation
Relevance to NSG
Adamowitsch
WG
Ten Year
Network
Development
Plan
ModPEHS
(electricity
highways)
NSCOGI
Energy
Infrastructure
Package
legislation
DG ENER
RES strategy
All
islands
approac
h
Indicative
DG ENER
Roadmap
2050 and
follow-up
Significance for achieving change
Bilateral
approaches
MS-led
CION-led
TSO-led
This requires both engaging in near-term landing points and setting up
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bigger decisions
for the longer term
Environmentalism
Considerable goodwill exists towards the concept, but
there is a notable absence of countries with both
willingness and ability to show leadership
Capacity
FR
DE
Note significant gap
UK
NO
DK
NL
Passive
IE
SE
BE
Indicative only
LUX
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… however
opposition is rare
Environmentalism
Active
State of play – key actors
UK
Needs offshore wind (despite occasional wobbles) but no real plan yet on
interconnection. Strategic advantage of driving rules for a new North Seas Grid,
creating import/export capacity and continuing to liberalise regional markets
DE
Energiewende creates material need for offshore wind and for balancing resources.
However still internally-focused and seeking to avoid net imports; no strategy likely until
after election.
FR
Currently focused on nuclear and southern interconnection rather than North Seas.
New Hollande government could change position – shift in nuclear policy would create
strategic need to shape NSG to stop France being left out.
NO
Large hydro export potential but internal divisions over new interconnection based on
fears of rising prices and Euroscepticism. Unlikely to lead agenda but could become
active follower.
DK
Large wind / RES ambitions but existing interconnection and shallow near-shore waters
means less urgent need for North Seas Grid. May become more engaged in NSCOGI
after end of EU Presidency.
IE
Large wind resource but needs interconnection to access export markets and balancing
resources. Could play active role if backed by others.
CION
Sees North Seas Region as a key test of market integration and seeking to enable the
right decisions. However has devolved responsibility for the project and nervous about
interfering too much – E3G
it can’t
forceGeneration
integration.
- Third
Environmentalism
Contents
Project background and methodology
Value case
Underlying choices
Political landscape
Policy, regulation and finance
Key conclusions
E3G - Third Generation
Environmentalism
The policy and regulatory landscape is complex
– but probably manageable
What objectives? What targets?
Carbon targets
Renewables targets
Interconnection objectives
Who designs? Who authorises?
Who regulates?
Transmission planning
Offshore wind coordination
Maritime spatial planning, permitting
Who pays for what?
How will the market operate?
What technologies can be used?
Infrastructure investment and cost allocation
Transmission investment for offshore wind
Grid reinforcement costs, network charges
Market coupling
Renewables support mechanisms
Capacity allocation, network codes
Technology support
Standardisation
… a mix of difficult but resolvable regulatory problems, and politically
contentiousE3G
issues
go wider than NSG
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Generation
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Short term priorities – policy and regulation
Early projects to demonstrate technologies (e.g. HVDC
hubs, circuit breakers) and test regulatory arrangements
Institutional arrangements for regulatory collaboration and
grid planning
Testing of new financing mechanisms (e.g. Connecting
Europe Facility, project bonds)
Development of longer-term energy policy and power
market arrangements (2030 framework, EMR)
Clarity/certainty on grid connection, market access and
liability regimes for offshore wind and grid operators
Overall focus on securing options
rather than full North Seas Grid blueprint
E3G - Third Generation
Environmentalism
Contents
Project background and methodology
Value case
Underlying choices
Political landscape
Policy, regulation and finance
Key conclusions
E3G - Third Generation
Environmentalism
Key conclusions
Strategic value
Critical role of politics
The North Seas Grid process has value not just for power
sector decarbonisation in NS region but also as a pathfinder
project for demonstrating regional cooperation and large scale
RES access.
There are considerable technology challenges, but these may
be overcome with the right regulatory and policy frameworks.
The regulatory and financing issues are complex but are
solvable with sufficient political will. However, without greater
political leadership and mandate from governments, inbuilt
conservatism among regulators and civil servants would lead to
only incremental progress.
Current opportunity
External political conditions are challenging – but there is clear
potential to put in place measures to secure future options (if not
a full ‘blueprint’ at this stage). The next 18 months is a critical
window for locking in progress.
Near term objectives
- ‘Leadership clusters’ of countries willing to move more quickly
and animate process
- Firmer institutional footing for regional cooperation
- Early projects to test both technology and regulatory models
E3G - Third Generation
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Potential milestones
2012
2013
Political leadership
New demonstrable leadership
from UK/Ireland grouping
Clarity on FR and DE
positioning
Political
commitments
New political declaration from
North Seas Countries Offshore
Grid Initiative at end 2012
Council conclusions during
Irish Presidency
Institutions
New institutional arrangements
for NSCOGI agreed at end 2012,
involving at least 7 member
states, plus new resources
NSCOGI takes up formal
role under EIP to prioritise
Projects of Common
Interest
RES policy
CION post-2020 RES
communication identifies
measures for further deployment
NS region
Infrastructure and
finance
Amendments to Energy
Infrastructure Guidelines
regulation to make arrangements
more likely to support NSG
investment
Technology
demonstration
Leadership projects
Decisions taken to proceed with
leadership projects demonstrating
new configurations or regulatory
arrangements
2014
2015 and beyond
Demonstrable leadership from
DE and/or FR
Arrangements put in place
for North Seas ISO (by
2020)?
High-level agreement on 2030
RES and carbon targets
2020 RES targets met in
NSG region
Funding for Connecting
Europe Facility secured in
MFF decisions
TYNDP 2014 includes
integrated NSG projects and
proposes extensive NS
interconnections
2010 TYNDP fully
implemented in NS region by
2020
SET Plan funding secured
in MFF decisions
SET Plan funding stream
developed for HVDC nodes
and offshore grid projects
(under EEGI)
Multi-terminal VSC HVDC
systems operational by 2017
– onshore and/or offshore
Larger scale leadership
projects agreed (e.g.
ISLES)
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At least 3 projects combining
wind with interconnection
under construction by 2017