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Cost benefit Analysis of Developing Offshore Windfarms in Conjunction with Interconnectors

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

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Cost benefit Analysis of Developing Offshore Windfarms in Conjunction with Interconnectors

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  1. Cost benefit Analysis of Developing Offshore Windfarms in Conjunction with Interconnectors European Offshore Wind Stockholm September 14th , 2009 Joe Corbett, Head of Asset Engineering

  2. Why Interconnection • Capacity Factor • Offshore Wind 40% • Expensive Unused Capacity • Security of Supply • Lower Risk • Increased Competition

  3. 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

  4. Interconnection Example

  5. Marginal Cost of an Interconnection UK Germany 20km 100km 100km 100km 50km

  6. Potential Revenue GB-DE Interconnection

  7. 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

  8. Supergrid Phase 1

  9. 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%

  10. Model Characteristics

  11. Sensitivity Analysis

  12. Work to be Done • Technical Work • Now there’s a market! • Capacity • Cost • Innovation • Regulatory Framework • EU Commission • ENTSO-E

  13. 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

  14. ? European Offshore Wind Stockholm September 14th , 2009 Joe Corbett, Head of Asset Engineering

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