Regulatory principles for meshed offshore HVDC grids

A meshed European HVDC offshore grid could provide significant benefits to the European energy market. Therefore, countries bordering the North Sea need to implement a harmonized regulatory and economic framework to fully exploit the potential of such offshore grids in the North Sea. This is a key conclusion of PROMOTioN. Its latest report “D7.9 Regulatory and financing principles for a meshed HVDC offshore grid” provides policy makers and stakeholders with recommendations on appropriate measures to enable the building of first hybrid assets.

The report comprises of recommendations based on research work done by Dr. Pradyumna Bhagwat (Florence School of Regulation, left), Ceciel Nieuwenhout (Groningen Center of Energy Law, middle) and Alexandra Armeni (Deutsche WindGuard, right).

Short-term recommendations

In the short-term, the report recommends to

  • improve governance and regulation of the internal market for (offshore) electricity by including a definition and substantive provisions on the regulation of hybrid assets in the Electricity Regulation; Hybrid assets combine both interconnection and wind farm export functions.
  • provide funding for technological innovation (e.g. novel energy storage techniques), and fund anticipatory investment which is cost-effective in delivering a multi-terminal HVDC offshore grids (e.g. island hubs).
  • support early communication between developers, authorities and other key stakeholders about new wind farm projects to enable identify meshed offshore grid development needs as early as possible. Opportunities for broader stakeholder involvement in the decision making process should also be identified.
  • formalize the Cross-Border Cost Allocation (CBCA) as a binding contract between the involved parties with a clear specification of non-compliance penalties. CBCA coordination is one of the most important pillars in the economic framework and should be promoted for complementary projects.

Long-term recommendations

  • In order to secure long-term regulatory stability, PROMOTioN recommends Member-States, third countries and the EU to consider the adoption a North Sea treaty, containing the objectives and principles of the offshore grid. Such a treaty would provide a stable governance and decision-making structure, a common interpretation of maritime law, and processes for long-term wind farm and grid planning. Moreover, it would allow for formal operational regulatory governance, fixing the terms of cooperation between National Regulatory Authorities and their decision-making process regarding cross-border links.
  • The long-term legal and regulatory stability is especially important for financing the offshore grid infrastructure. Investors rely on stable and predictable conditions, which include clear roles and responsibilities among the relevant actors. Moreover, access to equity for the required offshore grid investment needs to be facilitated. The published report summarizes the crucial elements for defining a regulatory framework and identifies the conditions necessary to support the financing of a meshed offshore grid.

The whole report can be downloaded here. The corresponding press release can be accessed below.