The EU Commission has proposed an ambitious increase in the expansion targets for electricity generation from offshore wind, which would require an investment of almost €800 billion by 2050.
300 GW offshore wind by 2050
In its Offshore Renewable Strategy, the Commission aims at reaching 60GW of installed offshore wind capacity by 2030 and 300GW by 2050. This is to be supplemented by an additional 40GW of ocean energy, such as tidal energy, power to gas or floating solar power plants by 2050 (1GW by 2030). For offshore wind alone this would mean a five-fold increase of the currently installed 12GW in the EU27 by 2030.
In the Strategy the Commission presents its vision of meshed offshore grids between the member states in all five sea basins of the EU, integrating not only offshore wind but possibly also storage and power to gas solutions.
Interconnector + windfarm = hybrid project
For the nearer future the Commission proposes to complement offshore wind feeding into one national grid only by introducing so-called hybrid projects. These comprise of offshore wind farms that are connected to more than one market via interconnectors.
Even though hybrid projects can be set-up and run in accordance with the existing regulatory framework, the Commission acknowledges that today, the EU’s electricity markets rules mainly fit the electricity market onshore. If offshore wind farms feed their electricity into an interconnector this might shift revenues normally generated by the offshore wind farm to the operator of the interconnector. The current rules on minimum capacity available for trade might also lead to either offshore wind farms being curtailed more often or, interconnectors to be oversized in order to accommodate the electricity generated by the windfarm and at the same time to allow for cross-border electricity trade.
Adjusting the regulatory framework
The Commission therefore proposes to adjust the current regulatory framework with view to a fair distribution of revenues and obligations between member states, offshore wind farms and interconnectors in the next 1 to 3 years:
- The grid connection conditions for high-voltage direct current systems should be harmonized in the member states. The process should start in 2021.
- Congestion revenues generated through the operation of the interconnectors of the hybrid projects could be diverted at least in part to the operators of the offshore wind farms. The Commission will present a proposal to amend the rules on the use of congestion income from interconnectors with regard to hybrid projects in 2022.
- As long as the regulatory requirements do not yet permit alternative uses of congestion income, the Commission proposes to take other measures to take account of the fact that the offshore grid may lead to redistribution from wind farm operators to grid operators via the generation of congestion revenue. This could be achieved by granting direct or indirect support.
- The Commission proposes the creation of a separate offshore electricity bidding zone in line with the existing rules on bidding zone review. More detail can be found in the Commission staff working document accompanying the Strategy.
- Before the end of 2021, the Commission will propose guidelines for cost-benefit sharing between member states in cross-border projects, to be supplemented by a guide to the distribution of costs and benefits of hybrid projects by 2023.
Funding
Two thirds of the €800 billion of investments needed by 2050 will need to go to grid development with the other third to offshore generation. By 2030, annual investment in onshore and offshore grids needs to rise from now €30 billion to €60 billion and shall mainly stem from the private sector. The Commission anticipates that the EU sustainable finance taxonomy will help channel private sector investment to the offshore networks and generation assets. The revised State aid guidelines on energy and environmental protection shall also be tailored to be fit-for-purpose for realizing the offshore renewable strategy.
In order to further incentivize investments, the Commission proposes to use the new financing possibilities of the Connecting Europe Facilities (CEF) for cross-border renewable energy production, the InvestEU programme for emerging technologies and funds from NER 300.
In 2021, the Commission will launch its first call for tenders for projects under the EU financing mechanism for renewable energy. More mature projects can also apply for funding under the Recovery and Resilience Facility set-up to mitigate the impacts of the covid-19-pandemic until 2023.