Impact of Wind Energy Support Schemes on the Development of an Offshore Grid in the North Sea

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1 Paper No: 14PESGM0689 Impact of Wind Energy

Mart van der Meijden (TU Delft) Hannah Muller

1 1 Paper No: 14PESGM0689 Impact of Wind Energy Support Schemes on the Development of an Offshore Grid in the North Sea Shahab Shariat Torbaghan, Dr. Madeleine Gibescu, Prof. Mart van der Meijden (TU Delft) Hannah Muller and Prof. Martha Roggenkamp (RUG)

2 2 Outline Research goals Support schemes for offshore wind Method for determining offshore grid design Complexity of the problem Numerical results Conclusions

3 Research objectives Determining the offshore wind capacity to install and design of the offshore grid (grid topology and cable capacities) for a given level of wind support, with the

3 3 Research objectives Determining the offshore wind capacity to install and design of the offshore grid (grid topology and cable capacities) for a given level of wind support, with the goal of: A. Harvesting the offshore wind energy most efficiently B. Creating capacities for international power exchange while maximizing benefits of consumers, producers, and investors

4 4 Research goal Regulatory Regime Offshore Infrastructure Support Schemes for Offshore Wind Farms Offshore grid topology and capacities

5 5 Why support schemes are needed? Currently, the development of offshore wind depends on financial support Reasons for that: Relatively higher cost that makes them economically less attractive for the investors New technology with Intermittent variable output: increases uncertainties/risks => support instruments lower perceived risk and improve investors confidence and investment security

6 6 Different types of support schemes Quantity based: Every responsible party has to consume/produce certain amount (%) of RES Price based Financial support as payment Generation based: feed-in tariff Capacity based

7 7 Why capacity based? Capacity based is considered as an alternative for generation based support schemes as: Capacity based support schemes directly triggers the expansion of installed capacity Reduces the risk of investment associated with variable generation like offshore wind. It limits the negative impact that large scale wind integration may have on market price and social welfare (e.g., emergence of negative market price in Germany during low demand period).

8 8 Research question Investigating the impact of implementing different levels of capacity based wind support schemes on the development of the offshore grid and the installed offshore wind capacity

9 9 Methodology Express formally as an objective function that can be optimized: Maximize: total incremental social welfare (SW) over all zones & (representative) time periods minus total transmission investment minus unsubsidized offshore wind investment SW = Benefit of consumption Cost of generation Converter voltages and cable capacities are decision variables Zonal imports/exports derived as dependent variables

10 10 Preparation of the input set: Social Cost Curve Contribution of each node in the rest of the system is modelled with its power injection (Pi) Pi is positive when power is injected from the node into the system

11 11 Analytical solution Analytical solution gives the pricing mechanism. HVDC derived pricing mechanism is Economically interpretable Consistent with existing onshore AC counterpart! The optimal design ensures Transmission investment = Congestion rents Provided that support scheme is selected adequately: Offshore wind investment = Offshore wind remuneration (Remuneration = subsidy + revenues from market sales)

12 12 Outline Research goals Support schemes for offshore wind Method for determining offshore grid design Complexity of the problem Numerical results Conclusions

13 13 Complexity of the Problem Desired Remuneration of the offshore wind farm equals the initial investment Complication Sales in the market depends on various factors (available wind, etc.) Expectation The planner considers the interdependencies

14 14 Approaches Approach 1 Determine the grid design based on minimum national provisioned offshore wind capacities. Then for the fixed grid design, the model determines the optimal offshore wind capacities for the given level of support. Approach 2 For each support level, co-optimize the offshore grid and wind capacities.

15 15 Technical design Modeling assumptions Perfectly competitive European markets Zonal market model (3 onshore price zones) Linearized aggregated supply/demand bidding curves Coordinated, simultaneous expansion for the infrastructure Input data hourly zonal supply/demand curves and locational wind speeds, April 2011 to March 2012 Different support levels Minimum national provisioned offshore wind capacity to be installed in the North Sea

16 Approach 2 Approach 1 16 Offshore Wind Capacities Higher support levels result in larger offshore wind capacity Support level % 0% 30% 50% 90% OW DK (GW) OW DE (GW) OW UK (GW) OW DK (GW) OW DE (GW) OW UK (GW)

17 Grid design Grid topology remains almost the same under all scenarios: OW subsidy level (%) 0% 30% 50% 90% K1 (GW) 2.9 2.9 2.6 25.

17 17 Grid design Grid topology remains almost the same under all scenarios: OW subsidy level (%) 0% 30% 50% 90% K1 (GW) K2 (GW) K3 (GW) K4 (GW) K5 (GW) K6 (GW) K7 (GW)

18 Numerical results: Approach 1-18 Different support level - fixed grid

19 Numerical results: Approach 2-19 Co-Optimizing offshore wind & grid

20 20 Conclusion Support scheme expenditures can amount to a large portion of the aggregated social welfare. The design of the grid and so the remuneration of different parties are observed to be severely affected by the level of wind support. Support schemes are important to be considered from the early design phase. The investment in the offshore transmission and wind infrastructures can be completely recovered if the support level is selected adequately.

21 21 Paper No: 14PESGM0689 Impact of Wind Energy Support Schemes on the Development of an Offshore Grid in the North Sea Shahab Shariat Torbaghan, Dr. Madeleine Gibescu, Prof. Mart van der Meijden (TU Delft) Hannah Muller and Prof. Martha Roggenkamp (RUG)

A legal framework for a transnational offshore grid in the North Sea Müller, Hannah Katharina

University of Groningen A legal framework for a transnational offshore grid in the North Sea Müller, Hannah Katharina IMPORTANT NOTE: You are advised to consult the publisher's version (publisher's PDF)