Sharing benefits and costs of integrated offshore grid structures

Policy Briefs
Jaap Jansen, Adriaan van der Welle, Carolien Kraan, Frans Nieuwenhout, Karina Veum

Key messages

The conventional approach for allocating cost of offshore grid investments in short:

  •  Attribution of costs of connecting an offshore wind farm to the home country transmission grid and the definition of home country transmission grid is country-specific.
  • Equal shares for the hosting countries in grid project costs and congestion income through their respective TSOs.

Alternative cross-border cost allocation (CBCA) methods considered in the NorthSeaGrid project are:

  • Positive Net Benefit Differential: cost allocation among countries in line with differential net benefit compared to the base case and compensation of negative/low net benefit differentials
  • Louderback : allocating to countries the directly attributable costs, adding the indirect – i.e. common – costs proportionate to the difference between stand-alone and direct cost.
  • The cost and benefit impacts of the distinct cross-border cost allocation methods should not only be considered at country level, but also at stakeholder level. The NSG project has pioneered an approach to do so.
  • The CBCA method to be adopted should yield an acceptable net benefit distribution among, at least, hosting countries. For this purpose, the NSG project has assessed the Positive Net Benefit Differential method.
  • Countries involved need to agree ex ante on a transparent and robust approach for net benefit determination and the cost compensation rule among affected/hosting countries.