Two models for removing grid-connection costs for offshore wind power

The Swedish Energy Agency has been commissioned by the Government to investigate potential ways to remove the grid-connection costs for offshore wind power. The Agency has chosen to examine two different models.

The first model entails moving the grid connection point to the offshore wind farm. This means that Svenska kraftnät (The Swedish National Power Grid) would be responsible for the planning, construction, and operation of the undersea connection cable and, hence, for all the costs entailed by the connection. Funding of the measure could be provided through an increased grid tariff.

relocation of grid connection point

However, this model would create unequal conditions for onshore wind power in the Agency's opinion, as onshore wind power and other electricity production facilities would continue to pay connection costs. It is also the Agency's assessment that there would be no incentive for wind power producers to select locations that lead to cost-efficient connections if they are not obligated to pay any portion of the connection costs.

The second model entails the introduction of subsidies to wind power producers for a portion of the connection costs. The Agency proposes that this support be limited to covering the undersea cable and associated transformers. This would create conditions more comparable to those of onshore wind power. Another benefit of this model, in the Agency's estimation, is that the total cost of the removal of connection costs would be limited while still retaining an incentive to connection locations that are cost-effective. It is proposed that the subsidies under this model be financed through the introduction of a special surcharge paid by all electricity consumers.

state-subsidized undersea cable

Removing the connection costs would lead to a change in the competitive conditions faced by different types of power generation. It would introduce an additional risk factor for stakeholders in the electricity certificate system and a risk of other, new forms of renewable electricity production being unable to compete. On the other hand, the removal of costs may make Swedish offshore wind power more competitive in the European context, which, given that this would lead to an expansion of offshore wind power, could lead to increased margins in electricity production if there are rapid changes in the electricity market that we cannot currently predict.

In order to continue promoting the provision of cost-effective energy in the event of a removal of the connection costs, the Agency believes that it is important, regardless of which model is chosen, to have some form of selection criteria and minimum requirements for proposed offshore wind projects connecting to the grid.