Offshore wind (OSW) is a promising source of energy in the Baltic Sea region for not only strengthening the security of energy supply but also for stimulating economic growth and industrial competitiveness. The Baltic Sea countries have announced ambitious plans to accelerate the development of the OSW industry and have committed to increasing cooperation in the region. While OSW has earned strong political and industry support in the region, several challenges remain. One of the main challenges is the development of the offshore grid infrastructure as projects seek interconnection as early as 2025. Baltic transmission system operators (TSOs) have already initiated a joint effort to develop common grid planning principles. That said, the region can benefit from adopting already proven OSW technologies and innovative solutions.
With this background, Global Transmission Report organised a conference on ‘Baltic Offshore Wind Transmission’ on October 11-12, 2021, in Warsaw, Poland. The conference focused on the plans, opportunities and technology solutions for the development of the OSW sector and the related transmission infrastructure in the Baltic Sea region. This led to a detailed discussion on the perspectives of the policymakers, regulators, developers, TSOs, technology providers and industry experts.
The key takeaways from the conference are presented below.
Policies, Plans and Opportunities
Adam Guibourgé-Czetwertyński, Undersecretary of State, Ministry of Climate and Environment, Poland, discussed the government’s initiatives to accelerate energy transition and support the development of the OSW industry. He shared that in light of the EU objective to achieve carbon neutrality by 2050, and the national renewable energy targets, increasing OSW energy in Poland will be essential. The Polish Energy Policy for 2040 is aligned with these objectives. Currently, the ministry is working on implementing the regulations of the Offshore Wind Act. The Act introduced the concept of bilateral contract of difference (CfD) to support OSW development. In the first phase, which ended on June 30, 2021, support for 5.9 MW OSW farms was provided by an administrative decision. Subsequently, Poland will organise auctions in 2025 and 2027 for 2.5 GW each. The support system for OSW development has already been accepted by the European Commission (EC). Furthermore, the Polish Offshore Wind Sector Deal was signed on September 15, 2021, to support the development of this sector in Poland and maximise local content in the supply chain. Support for development of new technologies is not only an opportunity to transform the whole economy into a greener one but an important stimulus to revive it after the pandemic.
Daiva Garbaliauskait–, Vice Minister, Ministry of Energy, Lithuania, spoke about Lithuania’s objective to increase the share of renewable energy (RE) in final energy consumption to 45 per cent by 2030 and further to 80 per cent by 2050. For this, the share of RE in electricity is targeted to reach 50 per cent by 2030 and 100 per cent by 2050. To accelerate RE capacity addition, Lithuania is taking a step-by-step approach to OSW energy use. Of the Baltic Sea OSW potential of 93 GW, Lithuanian waters account for 3.35 GW. The country is working on two OSW projects aggregating 1.4 GW, the first of which is expected to start generating electricity by 2028. The country’s draft OSW law is expected to be approved by the Parliament by the end of 2021 while the first tender is likely to be launched in the third quarter of 2023. Preparatory works including special planning and the environmental impact assessment (EIA) for the first 700 MW national OSW project are underway. The country also plans to become a future green hydrogen exporter.
Timo Tatar, Deputy Secretary General for Energy, Ministry of Economic Affairs and Communications, Estonia, discussed the country’s ambitious RE target (of 42 per cent in final energy consumption by 2030 compared to 30 per cent in 2019) and the role of OSW in achieving this. The country has an OSW potential of over 7 GW in the Baltic Sea. It plans to finalise the marine spatial plan (MSP) by the second quarter of 2022. It is piloting the cross-border hybrid project concept in the Baltic Sea through the 700-1,000 MW ELWIND project, which it is developing with Latvia. The final location will be selected after the feasibility study and EIA, which are underway. Estonia is seeking to formulate a wind farm building/operating model without additional subsidies. It will involve EU co-financing (through the Connecting Europe Facility) to keep electricity transmission charges as low as possible. By the end of 2022, the details of the project co-financing/financing decision will be approved. An international auction is expected in 2025-26 for a pre-developed area, where an EIA has been carried out and the network connection conditions clarified. The OSW park is expected to be operational by 2030. The project will serve as a proof of concept for a hybrid asset consisting of dual use transmission network and OSW park.
Offshore wind in the Baltic Sea
Giles Dickson, CEO, WindEurope, gave an overview of the recent developments in the OSW segment in the Baltic Sea. OSW is key to achieving the EU energy transition and will make the highest contribution to electricity generation by 2050. The Baltic Sea currently accounts for 2.8 GW or 10 per cent of Europe’s cumulative OSW installed capacity of 25 GW. By 2050, this will grow to 85 GW or 19 per cent of Europe’s OSW capacity. A huge buildout of OSW capacity is expected in the Baltic Sea between 2026 and 2030. By 2030, 13 GW will be installed in the Baltic Sea. Of this, Poland will account for 6 GW. In October 2020, the governments across the Baltic Sea signed a memorandum of understanding (MoU) to cooperate and coordinate on the buildout of OSW in the region. Hybrid grid connections may be developed between two or more countries, which can be plugged into the already existing interconnectors, or new interconnections may be built. Significant investment will need to be made in ports to accommodate OSW equipment to be transported to the offshore locations. Economic contribution of OSW to the EU GDP amounts to EUR7.5 billion. Each new OSW turbine results in EUR15 million of economic activity.
Michał Kaczerowski, CEO, Ambiens, spoke about the need to increase the pace of permitting for and development of the next OSW phases in Poland. The process must be more efficient and quicker given the experience gained in the first phase. Further, with auctions scheduled for 2025 and 2027, proposed OSW projects must be ready with their documentation to participate in those auctions. The entire permitting process including the environmental decision should be accelerated and completed in six to seven years rather than in the over 10 years currently taken. It is notable that several foreign investors are positive about the Polish part of the Baltic Sea.
Anna Moskwa, Director, Offshore Wind Projects, PKN Orlen, discussed the company’s plans to contribute to Poland’s OSW industry. PKN Orlen, which is developing a 1.2 GW OSW project in Poland’s first phase of OSW development, plans to begin construction on its project by early 2024 and start producing electricity by 2026. It is also keenly awaiting the second phase announcement. It selected Canada’s Northland Power as its partner after a very long process, based on factors including economic considerations, international experience and cultural fit. In the first phase, 20-25 per cent local content will be possible, which may be increased only in the second phase projects. In the second phase, OSW plus hydrogen projects are expected to be announced and PKN Orlen also has plans for a combined project.
Alfredo Parres, SVP, Industry Network Leader Renewables, Hitachi ABB Power Grids, spoke about how the supply chain industry is gearing up to participate in Poland’s OSW development. Hitachi ABB Power Grids is building the supply chain capacity in Poland and has started manufacturing equipment used in OSW projects in south Poland. It has engineering centres in Poland that can design and build complete offshore grid connections. The company is engaged in conducting connection studies and project designs. Given the ambitious EU target for OSW development, a wider grid vision is required. To support the development of such a grid, a 2 GW HVDC connection is ready. There are plans for a hybrid connection with HVDC systems. For development of a meshed grid, DC breaker and control and protection equipment are ready, but secured interoperability remains an issue. Onshore grid planning and vision is very critical, which is being coordinated by European Network of Transmission System Operators for Electricity (ENTSO-E) . TSOs must conduct studies to ascertain where a new grid is required and where the existing grid needs to be optimised. Digitisation will help carry more power in the system. The next step will be to integrate mega-scale plans, such as the 5 GW energy islands, with the onshore grid, which will require new procedures to run the system and to keep it stable.
Developers’ plans and perspective
Jakub Budzyński, Stakeholder Manager, RWE Renewables, spoke about the company’s current goals and future plans to build its OSW portfolio in the Baltic Sea. RWE Renewables is planning to develop OSW farms in the Swedish and Danish parts of the Baltic Sea and improve the local supply chain in these countries. It is also one of the pioneers in OSW integration in the Polish market, with its 350 MW F.E.W. Baltic II OSW farm entering the development stage. The project has been selected for the first phase of Poland’s ambitious OSW buildout programme. To ensure proper integration of its upcoming wind farm into the grid, RWE is also in discussions with Poland’s TSO Polskie Sieci Elektroenergetyczne SA (PSE).
Tadas Navickas, Managing Director, Sunly, talked about the organisation’s project portfolio and its future plans. Sunly is developing 1,664 MW of OSW capacity in the Baltics. The company aims to become a local development partner in the three Baltic countries of Lithuania, Estonia and Latvia to build a strong pipeline.
Michael Prutsch, Head of Portfolio Baltics, Ørsted, spoke about the company’s OSW portfolio and its future plans. It is involved in about 10 GW of OSW projects (either installed or under construction) around the globe. By 2025, it aims to more than double its OSW capacity to the equivalent of the annual electricity consumption of 30 million people. Having participated in the EU-funded Progress on Meshed HVDC Offshore Transmission Networks (PROMOTioN) project—the company is in discussions with key stakeholders on the integration of large-scale Baltic OSW into interconnected grids as well as the integration and execution of energy islands and its benefits for Baltic countries.
Maciej Stryjecki, Head of Offshore Wind Development, Polenergia, discussed the company’s OSW development status and focused on the challenges faced by it in the Polish market. Polenergia, which is a leader in Polish OSW investments, has partnered with Equinor to develop three OSW farms aggregating over 3 GW in the Baltic Sea. The most common issue faced by developers while planning a new OSW farm is spatial planning, followed by issues identified while conducting EIAs, which usually delay the development and commissioning of these projects. Abiding by the set timelines is extremely important for improving the execution stage of OSW development in the Baltic Sea.
Peter Tornberg, Head of Development and Acquisition, OX2, shared that the firm is currently developing seven projects in the Baltic Sea (Sweden and Finland) and plans to expand its portfolio going forward. Providing a proper a grid connection to OSW farms is quite challenging, especially with several projects being developed in surrounding areas.
Sensor technologies for future wind turbines
Jarek Rosinski, CEO, Transmission Dynamics, spoke about the increasing use of sensors and electronics in rotating machinery and Transmission Dynamics’ offerings in this segment. The company has deployed its sensors in the Levenmouth demonstration turbine (Scotland, UK) to enable tower monitoring including tower overturning moment data analytics, tower temperature data analytics and nacelle input torque data analytics. Sensors can generate excellent quality data with high resolution and are noise free. The next steps involve increasing the frequency of data sampling to gather more data points for machine learning, and deploying rainflow count algorithm to count fatigue cycles.
Flexible solutions for connecting OSW
Dave Walker, Offshore Grid Business Development Leader, Grid Solutions, GE Renewable Energy, spoke about the evolution of engineered solutions for connecting OSW to meet market dynamics. GE Grid Solutions has supplied HV equipment to OSW projects with aggregate capacity of over 5 GW in Europe since 2008. It is bringing innovations through its sustainable technologies for grid connection such as gas insulated switchgear (GIS) green gas grid (g3) and green power transformers. The GIS g3 reduces gas global warming potential up to 99 per cent versus sulphur hexafluoride (SF6) while maintaining the same technical performance and the same footprint. The key features of green power transformers include use of ester oil, which is biodegradable and practicably not flammable; hermetically sealed tank/vacuum tap changers, which have an extended lifetime and reduced maintenance; optimised low losses; solvent-free painting; and online/remote monitoring with online dissolved gas analysis (DGA).
Source: Presentation by Dave Walker, Offshore Grid Business Development Leader, Grid Solutions, GE Renewable Energy
Legal bankability aspects of offshore transmission
Bruce Chen, Of Counsel, DLA Piper, discussed the legal bankability aspects of offshore transmission. The widely prevalent radial connection model is consistent with the current regulatory approach, which differentiates between OSW grid connection and interconnector regimes. However, as Europe is moving towards the multi-purpose interconnector (MPI) model, regulations need to change recognising different use and ownership forms compared to current interconnector regulation. MPIs invariably introduce additional parties, complexity and risk in the financing case and thus need re-balancing through a stable regulatory regime and favourable or limited revenue regulation. There is a need to consider experience from different regulatory and financing models for new subsea transmission cables – such as EU exemptions, cap and floor, offshore transmission owner (OFTO) revenue regulation – to develop an attractive and bankable framework for transmission investment. Despite changes under the recast Electricity Directive (ED) regarding split ownership/operatorship for unbundling purposes, meeting unbundling and transmission system operator (TSO) certification tests for MPIs would remain a challenge.
Source: Presentation by Bruce Chen, Of Counsel, DLA Piper
Technology and Innovation in OSW Industry
Peter Sandeberg, Global Product Manager for Offshore Wind Connections, Hitachi ABB Power Grids, spoke about high voltage direct current (HVDC) technology and related innovations in the OSW industry. The global OSW market is rapidly expanding and there is an urgent need for mainland grid reinforcements and a coordinated offshore grid approach. Transmission technology building blocks are in place, with the first offshore HVDC project in operation since 2005. Presently, there are over 20 OSW connections in operation or construction in Germany, UK and China. In Europe, MPIs, energy islands and meshed DC grids have been envisaged to meet ambitious targets for OSW capacity addition. Notably, the DC grid technology is ready for the emerging grid excluding some key issues that need to be addressed including the development of HVDC hybrid breaker and interoperability/standards as well as regulatory challenges. Future opportunities for technology innovation exist for artificial islands and floating installations.
Source: Presentation by Peter Sandeberg, Global Product Manager for Offshore Wind Connections, Hitachi ABB Power Grids
Regional cooperation in the Baltic Sea region: ENTSO-E perspective
Iris Baldursdottir, Senior Adviser, ENTSO-E, spoke about the importance of regional cooperation. TSOs face a complete remake of electricity production in Europe. Integration of OSW is one out of multiple aspects that must be considered when developing future energy systems. In the emerging context, application of a holistic view across time, space and sectors is required. In the planning and operation of ENTSO-E’s proposed ONE system, TSOs’ role is to integrate a huge quantity of wind energy and transmit it to consumption centres across Europe; as well as coordinate the planning of the development of offshore and onshore systems, considering the entire system benefits, environmental protection and public acceptance. TSOs’ strength lies in cooperating for the operation of a large meshed, hybrid network. According to European Commission’s (EC) offshore renewable energy strategy, 300 GW of offshore wind plus 40 GW of ocean energies will be built by 2050. ENTSO-E is joining the public debate via position papers and a dedicated web section on offshore development.
Source: Presentation by Iris Baldursdottir, Senior Adviser, ENTSO-E
Integrating Offshore Wind – TSO perspective
Niclas Broman, Head of Offshore Connections, Svenska Kraftnät, discussed the recent developments in the OSW space in Sweden. OSW power in southern Sweden is a good solution to the problem of northern Sweden’s increased electricity usage. The country’s plan to expand the transmission network is in part driven by integration of generation from offshore wind into the onshore grid. As of September 2021, Svenska Kraftnät received grid connection requests for 116 GW of offshore wind in Swedish waters. Most of the requests submitted are in the south, of which 96 GW could be realised since many requests overlap. With the government’s decision to remove connection costs for OSW power, the TSO is currently engaged in planning and preparations to start building its organisation for future offshore grid transmission development.
Source: Presentation by Niclas Broman Head of Offshore Connections, Svenska Kraftnät
Getlyn Denks, Director, Offshore Grid Program, Elering, discussed the TSO’s plans to contribute to the development of OSW transmission in the Baltic region. In 2020, an MoU was signed by the eight Baltic TSOs, including Elering, to launch the Baltic Offshore Grid Initiative (BOGI). The scope of cooperation will include development of planning principles, system operation principles, and wind production connection principles. It will also aid in estimation of possible cost and the effect on tariffs of the offshore grid. In addition, Elering is working on the ELWIND project (a proposed cross-border hybrid offshore project) with Latvia. The grid connection for the project will be developed under a cooperation agreement between the TSOs – AST and Elering. The 700-1,000 MW project is expected to generate over 3 TWh of capacity annually.
Wojciech Lubicki, Chief of Engineering Department, Central Investment Unit, Polskie Sieci Elektroenergetyczne (PSE), spoke about the TSO’s plans to integrate the proposed OSW in the country. To prepare the grid for electricity generated by future OSW farms in the Baltic Sea, PSE plans to invest around PLN4.5 billion (EUR978 million) in the Pomerania area by 2030. It is estimated that by 2040, the OSW farms will be able to supply the Polish power system with approximately 11 GW of capacity. The TSO has already issued connection conditions for OSW farms with a total capacity of 8.4 GW. The first of them will start producing electricity as early as 2026.
Source: Presentation by Wojciech Lubicki Chief of Engineering Department, Central Investment Unit, PSE
Thomas Köbinger, Senior Advisor, System of the Future, 50Hertz Transmission, discussed the Elia Group’s plans to develop and innovate offshore wind transmission. 50Hertz has developed the world’s first hybrid interconnector between Demark and Germany (Kriegers Flak Combined Grid Solution). Further, it is working on developing hybrid interconnectors between Belgium and Denmark (Vindø Island); the Bornholm Energy Island between Denmark and Germany; and a proposed Belgian multi-purpose energy island. The company plans on promoting hybrid/meshed grids to contribute to climate targets and market development.
Source: Presentation by Thomas Köbinger, Senior Advisor, System of the Future, 50Hertz Transmission
Design, installation and maintenance of offshore grid assets
Dr Iván Arana, Senior Project Manager, Worley, discussed the benefits of the optimisation of electrical infrastructure. It can contribute to a levelised cost of energy (LCoE) reduction of up to EUR3 per MWh by increasing rated voltage, rated power and cross section. Additionally, having an optimum base case will save time and resources during the early phases of projects. Worley supports its customers during the conceptual design stage to make better decisions regarding electrical infrastructure. The company provides a holistic OSW farm design platform to track the progress of projects through different modules such as foundations, electrical, wind turbine generators, substations, certification, consent and security. The company can develop new modules for floating wind farms.
Ekkehard Stade, Director Marine Services, and Matthew Laing, Technical Discipline Lead, Subsea Cables, Global Maritime, discussed the project lifetime risks for OSW developments in the Baltic Sea. The main apparent risks pertain to Paleo valleys/channels; heterogeneity of soils; gravel, cobblestones and boulders; soft soils at surface; and sediment mobility and scour around foundations. The risks to cables relate to anthropogenic such as fishing gear or shipping anchors; on-bottom stability; external requirements such as minimum burial requirements; shipping channels; and sediment mobility. The transport and installation risks relate to factors such as cable landfall, jointing and trans-spooling.
Siddharth Uppal, Product Manager, Service & Installation, NKT, spoke about the operation and maintenance issues and solutions for HVDC systems. He pointed out that HVDC cable failures are expected to be rare but still are the main source of unavailability. The long duration of potential cable outages has a large stochastic impact on system availability regardless of the low failure frequency. A lot of valuable time may be lost on activities that can be prepared for in advance or avoided altogether. NKT’s automatic identification system is a subsea asset protection system that helps reduce the failure risk to the cable from external factors. NKT Service & Installation Business Line is establishing its operations in Gdynia, Poland, to cater to the demand of the growing Polish OSW market and meet local content requirements.
Optimal technology for OSW transmission
Benoit Duretz, Sales & Marketing Director, SuperGrid Institute, discussed future transmission electricity infrastructure challenges and optimal technologies to address them. The main challenges related to transmission are the integration of massive quantities of renewable energy; the transmission of large quantities of electricity over long distances onshore and offshore, including subsea; integrating a massive quantity of intermittent energy sources while remaining highly reliable and available; being widely interconnected (even between asynchronous grids); and interoperability (multi-vendor). New evolving innovative offshore grid solutions include the North Sea Wind Power Hub, the hybrid interconnection between Poland and Denmark through the Bornholm project and the Baltic InteGrid. Multi-terminal HVDC solution and meshed HVDC grids are the most relevant solutions to contribute to the massive integration of renewables and thus enable the energy transition.
Michal Gronert, Senior Project Engineer, DNV, also spoke about the challenges in OSW transmission and the available technology solutions. According to him, the key challenges are to find the right grid connection points onshore as well as finding the optimal offshore cable route to the landfall point, which is constrained by restrictions of marine activities, fishing, protected areas and existing infrastructure like pipelines and cables. There are currently two electrical balance of plant (EBoP) options for HVDC ranked in an ascending cost/reliability order – point-to-point and multi-feed. There are technical limitations with respect to both AC and DC systems. In terms of transmission systems, the maximum cable length of AC cable systems are limited by charging current (usually ~ 100 km). Meanwhile, HVDC cables are cheaper and have lower cable losses but also converter cost and losses. HVDC systems are therefore more reliable than AC systems for longer distances. HVDC systems are also cheaper for onshore sections.
Financing offshore wind
Wojciech Hann, President of the Management Board, BOŚ Bank, discussed the opportunities and challenges in the financing of Poland’s OSW projects. There is an active formation of consortia around the projects as well as the whole chain of subcontractors. This is important because the universal theme in most conversations with financial institutions and sponsors is the necessity of having international experience with large projects as well as strong local partners. The consortia already formed in Poland are clearly demonstrating this trend. Another aspect in consortia composition is experience in the debt market. In addition to providing financing, international banks are expected to set the stage in Poland with regard to the standards in financing. The role of financial advisors will be important in formulating the financing structure. Some projects may opt for multi-package for contracting although banks find the EPC approach easier to manage from the financing perspective. The sector will witness dual currency financing with the involvement of international banks and financial institutions. Polish banks are likely to play an active and substantial role in financing the 11 GW OSW projects expected to be commissioned up to 2040 in two phases. This would involve a huge investment of PLN130 billion up to 2040. The Polish banking sector is over-liquid, coinciding with the appetite of banks to engage in large projects of the scale involved in OSW development.
Vincent Metzler, Project Finance Division, European Investment Bank (EIB), also spoke about the prospects and problems in the financing of OSW in the Baltic Sea. According to EIB’s lending roadmap, 50 per cent of future lending activities will be directed to climate action, mainly the renewable energy sector. So far, EIB has provided over EUR11 billion in financing for over 9 GW of OSW capacity. In addition, it has financed the development of the accompanying grid network and extended financing to the relevant TSOs. In Poland, it will be interesting to see how project finance will be structured given that each project will involve huge investments. Although CfD has been extended for a long duration, it is not consistent with the capital market. As a result, OSW projects may require debt financing with longer tenor. Financing of Polish OSW projects in local currency will remain an issue.
The way forward
Exciting times lie ahead for Baltic OSW development, which will contribute to EU’s long-term climate and energy policies focused on meeting ambitious carbon emission reduction and renewable energy generation targets. That said, the success in meeting such ambitious targets depends on the timely execution of projects, innovative regulatory schemes, regional cooperation as well as technology and innovation.