German Offshore Grid Costly and Inefficient – Study

German offshore grid network system is too expensive, inefficient, and will lead to billions of euros in additional costs by 2030 compared to its UK counterpart, according to a study commissioned by Ørsted.

The study, Market Design for an Efficient Grid Connection of Offshore Wind Energy, carried out by DIW Econ, compared the market design of German offshore grid systems with the British market design.

It concludes that the inefficient regulation of offshore grid connections is estimated to lead to EUR 8.3 billion in additional costs to German electricity consumers between 2013 and 2030.

In direct comparison to the British system, the German system, at EUR 35/MWh, is twice as expensive as that in the United Kingdom (around EUR 16/MWh). Even after considering different connection lengths, technologies, environmental requirements, and financing conditions, an average cost difference of EUR 10/MWh between Germany and Great Britain still remains, according to the study. In addition, UK offshore grid connections provide greater security of supply, the study said.

The most important difference between the two systems is that in Germany the planning, construction, and operation of offshore wind farms and of grid connections is done by different entities. This leads to a much higher coordination effort. The transmission system operator also has a monopoly on the offshore grid and faces no competition, and is free to pass additional costs on to the consumer, according to the study.

In the UK, the offshore wind farm and the offshore grid system are being built by the offshore wind farm developer. Therefore, the wind farm developer is also responsible for connecting the wind farm to the national grid. Both the wind farm and the associated grid connection are awarded as part of an open call for tenders. In this way, not only the power generation is determined by competition, but the network expansion as well, the study said. This leads to a total optimization of the grid connection and the wind farm, less coordination efforts, no additional costs, no compensation payments for delayed grid connection, and thus no costs passed on to the end consumer, according to the study.