Cost benefit Analysis of Developing Offshore Windfarms in Conjunction with Interconnectors European Offshore Wind Stockholm September 14 th , 2009 Joe Corbett, Head of Asset Engineering
Cost benefit Analysis of Developing Offshore Windfarms in Conjunction with Interconnectors
Jan 17, 2016
Cost benefit Analysis of Developing Offshore Windfarms in Conjunction with Interconnectors. European Offshore Wind Stockholm September 14 th , 2009 Joe Corbett, Head of Asset Engineering. Why Interconnection. Capacity Factor Offshore Wind 40% Expensive Unused Capacity Security of Supply - PowerPoint PPT Presentation
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Cost benefit Analysis of Developing Offshore Windfarms in Conjunction with InterconnectorsEuropean Offshore WindStockholmSeptember 14th , 2009
Joe Corbett, Head of Asset Engineering
Why Interconnection
• Capacity Factor– Offshore Wind 40%– Expensive Unused Capacity
• Security of Supply
• Lower Risk
• Increased Competition
Interconnection Advantages
• Allowing the variation in renewables output to be smoothed
• Providing the ability to source least cost generation from amongst different countries
• Enhancing security of supply by providing additional sources of power
• Enabling peaks in demand to be met from imports of power
• Providing access to energy storage facilities• Allowing access to more cost effective sources of
ancillary services
Interconnection Example
Marginal Cost of an Interconnection
Item Cost/€ No. Total cost (€m)Cost of additional offshore DC isolators 1 2 2
Cost of DC offshore cabling (per km) 0.8 100 80
Cost of DC onshore cabling (per km) 0.5 0 0
Cost of onshore converter station 120 0 0
Cost of offshore converter station 180 0 0
Total additional capital cost 82
UK Germany
20km 100km100km 50km100km
Potential Revenue GB-DE Interconnection
How Much Would Super Grid Cost?
• Recent UK OFTO valuations provide some context– Just over €350 - 500M per GW of Wind for offshore grid
– Mainstream Model– Assume Super Regulator– Assume Super Operator– Regulated Income = 10% RoE– 21 GW Offshore Wind Connected in Stages– Calculate Use of System (TUOS) if Wind must Pay
Supergrid Phase 1
Base Case Analysis
• Calculate Use of System Charge (TUOS) for 21 GW of Wind assuming:– Standard Project Finance– 70:30 Gearing– 20 Year Debt– 25 year Life– Losses 4%– Inflation 2%
Model CharacteristicsGearing 70/30
Total Capex €34bn
Nameplate Wind Capacity 21GW
Wind Capacity Factor 40%
Return on Equity 10%
TUOS €35 /MWh
Sensitivity Analysis
No Phasing out of Revenue
1% Revenue Inflation
3% Revenue Inflation
1% Capex Inflation
3% Capex Inflation
1% Opex Inflation
3% Opex Inflation
3% Transmission Losses
5% Transmission Losses
Decrease Capex 10%
Increase in Capex 10%
Increase in Capex 15%
Wind Capacity Factor = 41%
Wind Capacity Factor = 38%
Wind Capacity Factor = 39%
65% Gearing
75% Gearing
80% Gearing
6% Debt Interest
8% Debt Interest
9% Debt Interest
11% IRR on Equity
9% IRR on Equity
25 year Debt Tenor
30 year Debt Tenor
€31.0 €33.0 €35.0 €37.0 €39.0 €41.0
TUOS Charge
Work to be Done
• Technical Work• Now there’s a market!• Capacity• Cost• Innovation
• Regulatory Framework• EU Commission• ENTSO-E
Conclusions
• Europe needs:– Energy Security
– Reduce fossil dependence
– Develop where Resource not Constrained
– Deliver to Consumers
• Offshore Wind will be Key• Interconnection makes sense:
– Technically
– Economically
• Competition
• Reduce Cost to End-Users
• Supergrid Costs– TUOS ~ €35 / MWh– Will Reduce when other players given access to Capacity
?European Offshore WindStockholmSeptember 14th , 2009
Joe Corbett, Head of Asset Engineering
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