Market modelling and socio-economic analysis of a potential multi-purpose interconnector between GB and the Danish energy island

George Charalampous and Sotirios Paschalis

National Grid, UK

The UK government has set an ambitious vision to install 50GW of offshore wind by 2030. Offshore wind has seen tremendous growth over the past few years in GB, thanks to the gradually decreasing costs, the development of a robust and mature supply chain and, most notably, the high wind potential associated with the country’s geography. However, the onshore grid constraints could introduce delays to future projects and hinder investments in the sector. At the moment, offshore wind farms connect radially and build standalone connections to the onshore network. Concerning the large volume of projects under development, this approach requires multiple separate offshore transmission connections, which may raise public acceptance issues and not promote any form of coordination and synergies between the developers.

Therefore, this necessitates the deployment of modern and pioneering approaches to connect offshore wind and unlock opportunities to share common grid connections and infrastructure whilst leveraging the economies of scale, reducing the amount of electricity works onshore, minimising the impact on coastal communities and accelerating the pathway to net-zero. This paper investigates the economic and market benefits of paving the way to multi-purpose interconnectors (MPIs) and combining cross-border interconnectors with offshore wind farm connections. MPIs are dual functionality transmission assets that can connect offshore wind farms in the UK and EU and serve as cross-border interconnectors if there is no wind or the windmills are partially generating.

In particular, this study discusses the socio-economic benefits of a potential MPI project between GB and the Danish energy island (proposed by the Danish government to create an offshore wind cluster), which aims to connect 1.5GW of offshore wind in the UK and up to 5GW on the other side. Also, the Danish energy island is expected to connect with Belgium via a 1.5GW cable. The authors performed a series of market modelling simulations using scenarios developed internally (by the Market Fundamentals team at National Grid) to quantify the benefits of the underlying project relative to a situation where the same amount of wind is connected radially and there is no cross-border transmission infrastructure to facilitate the sharing of energy between the two countries. Moreover, a set of sensitives were taken into account to address the uncertainty around commodity prices and evaluate the impact of having different project topologies and configurations.

The socio-economic benefits revolve around consumers, generators, CO2 savings, and MPI owner benefits in the respective countries as well as assess the approximate costs to build the asset and weight in other wider benefits linked to the environment and society. Finally, the analysis which was conducted for the period between 2030 and 2050 reveals the net benefits associated with the MPI project in line with the guidelines set by the energy regulators to evaluate a similar type of infrastructure.