IN DEPTH: Grid needs joined-up thinking

A joined-up, “meshed” grid is one of the most obvious ways to bring down the cost of the UK’s offshore wind programme, yet there is no agreement on how — or even whether — it will ever happen.

There is little argument against the idea of such a grid, which would flow electricity from multiple projects and zones to shore in concert, says Moray Thomson, a partner at the MacRoberts law firm specialising in energy and planning.

Such an approach would lower capital costs and reduce environmental impacts, while minimising the need for upgrades to the onshore grid — often one of the toughest aspects of a project to bring through to consent. It would also facilitate the development of a North Sea supergrid in the years ahead.

The UK government estimates that greater co-ordination could reduce the cost of connecting offshore generation by €3.5bn ($5.55bn) by 2020, to say nothing of the benefits in the years beyond, when the whole of Europe’s electricity system opens up.

Yet with Round 3 projects only a few years from starting construction, little is happening. The market regulator, Ofgem, developers and the government all point fingers at one another — and to some extent all three are justified.

It’s not surprising, or even a bad thing, that meshed grids were not built for the Round 1 and 2 wind farms now in operation, with projects instead linked to the grid via point-to-point or “radial” connections.

Many existing projects are relatively small and remote, and were built when the full scope of the country’s offshore ambitions was not yet clear, notes Grant McKay, UK marketing and sales manager for grid components at ABB. “The majority of schemes built to date weren’t necessarily suitable candidates for ­co-operation,” he says.

The problem is future projects, many of which are clustered geographically, or at least are likely to flow electricity onshore along the same coastlines, especially on the eastern coast.

In Germany, developers are forced to rely on transmission system operators to build offshore grids in time for the commissioning of their projects — an arrangement that has led to painful delays.

In contrast, British developers can build their own connections and transfer ownership to a third party later. As a result, grid delays have been far less of an issue for the UK industry.

The disadvantage of this system is there is no incentive for individual developers to build a more expensive grid now that might accommodate a rival developer’s project in future, even if the benefits for the industry as a whole are clear.

In some cases, developers are making “anticipatory investments” in offshore grids that may not be fully utilised for years — but only when that future utilisation will come from their own projects, says Matthew Knight, Round 3 business development director for Siemens Energy.

“Even that is not a decision people take lightly,” Knight says. “It means twice as many lenders, twice as many complications, and it’s ultimately twice as difficult to reach a final investment decision.

“You’re asking one particular party to take a risk upfront, but the benefits accrue to the whole industry — or to UK ratepayers at the end of the day [via lower electricity prices].

“It’s a much harder sell for developers when you’re splitting the benefits around.”

Some observers believe the Crown Estate, owner of the UK seabed and licenser of Round 3 zones, should twist developers’ arms to make them co-operate. Others acknowledge that it has already tried hard to bring various parties together, to little avail.

At the end of the day, the Crown Estate has little leverage because under the existing system, developers can simply walk away from projects if they become uncomfortable with the economics — a nightmare scenario for UK energy policy.

Ofgem is reviewing the arrangements for installing offshore transmission, to encourage greater co-operation. But industry sources say the speed at which such deliberations are moving is out of sync with broader industry development.

Duncan Stone, head of offshore electricity networks at the Department of Energy and Climate Change, acknowledges that under the current system, any co-ordination ultimately boils down to “private, commercial agreements”. The government is fundamentally more comfortable with that approach than some more “socialised” arrangement.

That doesn’t completely rule out a meshed grid in UK waters.

“From what I understand, there are actually plans and possibilities for co-ordination at some Round 3 projects,” Stone says. “But I do think there’s a real question as to whether there is one body with sufficient holistic powers of planning and foresight — and even powers [to force developers], if necessary — to stick up for [the national interest].”