In April of this year, nine heads of state and their energy ministers, along with the President of the EU Commission, came together in Ostend for the North Sea Summit to discuss new commitments for offshore wind development. The leaders agreed to deploy 120 GW of offshore wind in the North Sea by 2030, and a minimum of 300 GW by 2050. In order to achieve this ambitious goal, cooperation projects will need to be developed to construct an offshore electricity grid in the North Sea.
Jas Basi, Senior Associate on Energy Policy at Global Counsel, highlights that while the political momentum from the North Sea Summit is encouraging, there are still significant policy challenges that need to be overcome in order to achieve this goal. One of the main challenges is that planned offshore wind capacity far exceeds current demand, meaning that the concept of “energy islands” has gained traction. These hubs for electricity generation would connect many wind farms and interconnectors to several countries.
However, there are a number of regulatory and planning issues that need to be addressed to make this vision a reality. The lack of a “one-stop shop” for regulatory, licensing and permitting approval across the North Sea means that potential transmission projects face the challenge of having to seek approval from a multitude of different authorities. Additionally, infrastructure regulation and planning will require designing the right operational framework that balances the needs of transmission system operators (TSOs) and investors.
One of the regulatory issues that needs to be addressed is the rule enforced by the European energy regulatory ACER that grid operators must always reserve 70% of the available capacity for cross-border electricity trading transactions. This creates uncertainty for a prospective wind farm owner, as to whether they can transport their product to shore, potentially leading to scenarios where wind output is curtailed or countertrade.
Another challenge that policymakers face is providing clarity on future market regulation for offshore wind farms in the North Sea. The regulatory terms for how revenue will be shared between generators and the transmission companies must be set. The Commission has proposed the creation of offshore bidding zones as the future regulatory pathway for offshore wind projects that are connected via hybrid interconnectors.
Finally, there is the question of the EU-UK framework. Realising the full potential of the North Sea will require cooperation and integration across the European neighbourhood, which has direct implications for the UK, including the prospects of future deepening EU-UK collaboration on energy policy. While the UK signed a memorandum of understanding with its maritime neighbours last December, uncertainty remains over the future electricity trading system between the UK and EU.
To achieve the goal of the North Sea becoming the “world’s biggest power plant,” coordination will be required in several areas, including planning, market design, and the future UK-EU framework. Basi stresses the importance of sustaining the current political momentum in technical regulatory discussions to overcome the policy challenges that lie ahead. “The delivery of the political ambitions for the North Sea will require coordination in several areas including planning, market design and the future UK-EU framework,” he says.
