Europe is betting big on offshore wind development to reach the EU Green Deal objective of achieving carbon neutrality by 2050. The European Commission’s (EC) offshore wind strategy envisages 300 GW of installed offshore wind capacity by 2050. This requires unprecedented grid and spatial planning, engineering, construction and financing efforts both offshore and onshore. The key challenges for the European electricity system relate to establishing the required connections and grid development at least cost; keeping the system secure; accommodating a complete redefinition of power flow patterns; considering key constraints linked to spatial planning, environmental protection and public acceptance; achieving an integrated perspective over time, space and sectors; and ensuring flexible resources to keep the power system balanced.
The European Network of Transmission System Operators (ENTSO-E) published a series of papers to assess the possible solutions to help realise the EC’s offshore strategy. It evaluated the key areas of system development, system operation, interoperability and market design in which TSOs have an essential and active role in enabling the achievement of the EU offshore goals. In July 2021, ENTSO-E published the summary of recommendations for offshore development.
According to ENTSO-E’s key findings, the existing roles and regulatory frameworks are largely fit for purpose for offshore networks as well. Existing, well-functioning solutions applied onshore can be used for offshore system development, market design and system operations. It also recommends a quantitative analysis to assess the final impact of offshore development and the regulatory options considered on welfare, CO2 savings, market functioning and on the way interconnected systems will be operated to maintain their security.
Global Transmission Report presents the key highlights of ENTSO-E’s views and recommendations on offshore grid development.
System development – holistic planning of a more complex but integrated system
So far, offshore grid developments consist mainly of single-purpose solutions such as radial connections of offshore windfarms (OWFs) and submarine interconnections connecting two bidding zones. Going forward, while single-purpose solutions will continue to be preferred in many cases, there will be an increasing number of dual-purpose solutions that connect both markets and wind to shore (offshore hybrids). Multi-purpose solutions, which could cross energy sectors and include offshore consumption (like electrolysers), will emerge as well.
To deal with the new developments, ENTSO-E and the TSOs will broaden the scope of the Ten-Year Network Development Plan (TYNDP) to integrate offshore and onshore developments, ensuring holistic planning across time, space and sectors (a one-system approach) to bring offshore renewable energy to end users. TSOs are responsible for selecting the most suitable connection point to shore, considering potential onshore congestions, expected future OWFs’ connections, and essential network development or reinforcements.
Figure 1: Existing and future OWF grid configurations
Figure 2: ENTSO-E’s one system vision for 2030
Ensuring interoperability requires mutual development effort
Multi-terminal (MT) and multi-vendor interoperability will be key for ensuring the successful development of the high voltage direct current (HVDC) offshore systems, contributing to increased cost efficiency and reliability of the future grid. HVDC grids can grow at the required pace only if interoperability is not an implementation risk for TSOs. There are two kinds of interoperability – technological and manufacturer/vendor. The first refers to operation compatibility of different technologies including from the same vendor, while manufacturer interoperability refers to operation compatibility of the same or different technologies from different vendors. To ensure interoperability, some of the technical issues that need to be resolved relate to standardisation of systems and equipment, modelling requirements, demonstration in target environment, functional and operational requirements, protection of MT HVDC systems and revision of power system engineering and planning approaches. The non-technical issues relate to intellectual property rights, contractual relations and warranties as well as regulation and legal framework.
Future technological developments must be considered to establish technical interoperability and standardisation. In this respect, the TSOs will need to continue to collaborate with technology providers, relevant stakeholders and policymakers to develop practical technical and legal solutions. To support the development of interoperability requirements, a full-scale demonstration project is necessary to reach a higher level of technology readiness and facilitate the standardisation of systems and equipment in a ‘plug and play’ way.
Figure 3: Roadmap to development of interoperable MT HVDC system
Market design – European markets across land and sea
Single-purpose solutions are well established in the existing market framework. With the deployment of dual and multi-purpose solutions, treatment of offshore wind power needs to be considered from the market standpoint.
ENTSO-E studied the pros and cons of the two main market design concepts – offshore bidding zones (OBZ) and home market design (HM). Under the OBZ design, a separate bidding zone is formed containing only offshore generation and potentially demand where grid connections are interconnectors (cross-zonal capacity). OWFs receive the price of the non-congested area or the low price area. In the case of the HM design, offshore generation is market-wise part of a specific bidding zone or the home market. Import capacity to this bidding zone is calculated by the TSO based on the forecast residual transmission capacity after taking expected offshore generation into account. OWFs receive the price of the home market, which may be the high or low price, depending on the flow direction. The HM concept is commonly used for radial connections of OWFs and offshore wind hubs to shore.
ENTSO-E set out to resolve the trilemma of achieving system operation efficiency, market design efficiency as well as alignment with policy objectives while optimising social welfare, which is at the core of ENTSO-E operations.
From the system operation efficiency perspective, in the case of OBZ design, offshore grid constraints are fully considered; offshore imbalances and intraday trades do not have a major impact on TSO costs and risks; imbalance settlement reflects true balancing costs; and sufficient cross-border capacity to allow self-balancing is always available. OBZs also ensure market efficiency through competition, giving correct price signals to other purposes including on-site hydrogen production and compatibility with existing requirements for capacity allocation as well as with flow-based market coupling principles (advanced hybrid coupling). Therefore, ENTSO-E has concluded that the use of OBZs appears to be a promising solution.
However, the OBZ market design could have an impact on market revenues for OWF connected to a hybrid asset, in comparison with the HM model. While the actual effect on final positions would significantly vary from project to project, a revenue stabilisation mechanism (for example, subsidies) for the wind farm operators may be needed. The choice of an appropriate mechanism in that respect and especially the source of financing needs to be assessed against possible effects on market functioning and competition, the impact on onshore grid users, and compatibility with key principles underlying tariff-setting rules in the EU. Solutions with respect to renewable energy remuneration should be compatible with the principles of onshore market and grid operation. While market solutions must comply with the intent of the European regulations such as the Clean Energy Package (CEP) and capacity allocation and congestion management (CACM) guidelines, it is acknowledged that the regulatory framework may need to be further developed to account for the characteristics of a future integrated power system across onshore and offshore.
Figure 4: Comparison between OBZ and HM market design
Note: Market flow is towards bidding zone 1 or the home market.
System operations – regional cooperation to ensure efficient integration across land and sea
Like market operations, system operation is based on common European principles, and the related tasks are governed by the CEP and the corresponding network codes and guidelines. Onshore system operation solutions are extended to offshore systems as there are no boundaries between the two power systems. TSOs can transfer existing processes and concepts to meet the technical challenges of a meshed DC offshore grid infrastructure.
Offshore developments will impact the processes involved in managing imbalances offshore and onshore. The responsibility for their imbalances will remain with the market parties and that for balancing the system in real time with TSOs. To integrate large amounts of offshore wind power, TSOs need to have access to significantly more flexibility resources to balance the interconnected power systems and to fulfil their primary role, which is to provide electricity to customers at all times. For this, TSOs rely on flexibilities provided by market actors, which are mainly onshore today. Therefore, parallel development of flexibility and innovative solutions, including large-scale storage, must take place for successful offshore renewable energy integration. This will be further developed through ENTSO-E’s ongoing work on the 2050 horizon and long-term scenarios.
ENTSO-E believes that system operation challenges can be tackled by building on existing solutions. This can be done by using all possible means to keep the system balanced and through enhancing TSOs’ direct coordination with regional coordinating centers (RCCs), and including non-EU neighbours.
The current regulatory set-up is suitable for coping with the stepwise development of offshore grid infrastructure. Existing roles of TSOs and RCCs can be applied offshore, ensuring efficient OWF integration, safe system operations and sharing of reserves across the entire European energy system. Further, given the scale of the expected transition, stability in the regulatory design for system operation is vital to ensure reliable and secure operation. The focus should be on full implementation of the existing legislation and improving existing solutions, aimed particularly at increasing the efficiency of market and system operations. TSOs can continue to coordinate with RCCs efficiently building on experience gained by using a well-established coordination model. Overall, they must continue to take responsibility for the efficient offshore and onshore grid development and operation and engage with all actors for the successful realisation of the internal energy market and the achievement of climate neutrality targets.
The way forward
Offshore wind is expected to play a substantial role in reaching the EU’s decarbonisation targets. It is one of the aspects that needs to be considered when developing future energy systems. To ensure the smooth integration of huge OWF capacities, transmission infrastructure must evolve simultaneously.
ENTSO-E has defined the basic pillars to address the key challenges to integrating offshore wind into the grid. These are undertaking holistic planning to ensure timeliness (across time, space and sectors); following a modular and stepwise approach based on consistent planning methods; developing interoperability to unlock smarter integrated system operations; keeping the energy bills and environment footprint low through innovation; and formulating a future-proof regulatory framework consistent with common EU principles. The principles applied in the solutions used for onshore and offshore system operation are European. The guiding principle for TSOs is to act locally, coordinate regionally and think European.
From the system operation standpoint, the idea is to plan and operate one integrated system that will facilitate the integration of a huge quantity of wind energy to consumption centres across Europe. TSOs are gearing up to take up the new task of cooperating and coordinating the development and operation of a large meshed hybrid network to accommodate offshore wind generation into the European grid.