5.2 Results
5.2.7 Comparison of scenarios
Figure 5-22 Changes in aggregated generation costs* for the Low GPC scenario compared to the Low GC scenario (top) and the Ambitious GPC scenario compared to the Ambitious NP scenario (bottom). Shown as €/MWh of additional offshore wind power.
scenarios. The costs include not only the cost to deploy Baltic offshore wind power, but also all costs associated with the rest of electricity supply, including all CAPEX for new generation capacities, and all OPEX, including fuel and emission costs. Notably, impacts on the costs of onshore grid investments and congestion management within price zones are excluded from the aggregate cost figures provided by the market modelling. Impacts on internal grid costs are analysed separately as part of Task 3 and are accounted for as part of the total Cost Benefit Analysis presented in Chapter 1.
Baltic offshore wind power generation costs
The cost to deploy Baltic offshore wind power consists of the cost of the offshore wind farms themselves (wind turbines, internal connection and offshore substation) and the cost of connecting the offshore substations to an existing substation in the onshore grid. The calculation of the costs of the offshore hub configuration is described in Appendix D.
Table 5-5 shows the aggregate annualised deployment cost35 for Baltic offshore wind power in the different scenarios. It is apparent that the lowest cost sites are used in the Low scenarios, which show lowest average LCOE. As deployment increases, higher cost sites are used, increasing average LCOE. Adding grid cooperation increases LCOE due to the increased cost for the advanced connections, while regional cooperation mainly lowers average LCOE as better sites are used. However, in the Low GPC scenario, LCOE is increased, since it is worth using more expensive sites in order to achieve higher market value. It is thus important to note that LCOE figures for Baltic offshore wind power alone cannot point out the most cost-efficient scenarios. Market values also has to be taken into account.
Table 5-5 Annualised investment costs for offshore wind power deployment in the Baltic Sea in different scenarios
Wind farms (€m)
Connections (€m)
Hubs (€m)
Total (€m)
Avg. LCOE (€/MWh)
2030
Low NP 747 35 0 782 50.32
Low GC 816 9 85 911 57.47
Low GPC 798 10 85 893 56.50
Ambitious NP 1,762 90 0 1,851 51.26
Ambitious GC 1,900 30 206 2,137 55.72
Ambitious GPC 1,896 38 206 2,14 54.81
2050
Low NP 2,566 159 0 2,725 41.00
Low GC 2,617 64 210 2,891 43.87
Low GPC 2,771 72 210 3,053 46.04
Ambitious NP 4,266 223 0 4,49 43.81
Ambitious GC 4,691 98 454 5,243 47.12
Ambitious GPC 5,234 135 454 5,822 45.98
Looking at Baltic offshore wind power deployment costs alone, we see that they are higher in the regional grid cooperation scenarios relative to the national scenarios. There are two reasons for this. First, the wind sites located close to the hubs, and supported by their construction, are in deeper waters and, as a result, we see higher costs for the wind farms
35 CAPEX, shown as annualised values using a real WACC of 5%, with assumed lifetimes of 20 years for the wind farms and 40 years for the connections.
themselves. Secondly, the HVDC substations used by the hubs are significantly more expensive than radial AC connections used in the NP scenarios.36 On the other hand, the hubs provide additional transmission capacity that is not included in the National Policies scenarios, thereby potentially increasing the market value of the offshore wind power generation.
Aggregated generation costs
Looking at the aggregated generation costs, which cover both Baltic offshore wind power and all other forms of generation, provides some insight into which scenarios reflect the most efficient means of meeting projected future electricity demand.
Table 5-6 below shows the headline numbers for all of the scenarios. In 2030, the Low National Policies scenario shows the lowest cost. In 2050, the Ambitious Regional Grid and Policy cooperation scenario shows the lowest cost.
For 2030 under the low deployment case, the grid cooperation scenario and the grid and policy cooperation scenario negatively affect costs because the hubs’ costs exceed their benefits.
Beyond 2030 however, the changes made under the grid and grid and policy cooperation scenarios prove to be beneficial, even with low deployment.
If we look at policy cooperation alone (without including hubs), we find that it is beneficial even in 2030 and under the low scenario, as shown on Table 5-7.
With an ambitious target for the deployment of Baltic offshore wind power, the need for cross- border transmission capacity increases, and thus the grid and policy cooperation scenario shows the lowest costs, not only in the long term, but also in 2030. In the next section, we explore the impact of the hubs on the results in greater detail.
The results reflect both the increasing need for renewable electricity generation in the system over time and further expected reductions in the cost of offshore wind power.
36 Radial connection costs are based on 132 kV AC connections, while hub connections are assumed to be 220 kV HVDC. Optimisation of the connection at individual sites as well as different technology choices for the individual hubs could change the relative cost of these components.
Table 5-6 Annual aggregated generation cost (all generation) for the different scenarios Baltic
offshore wind
€m
Hubs
€m
Rest of generation mix
€m
Total excl.
hubs
€m
Total incl.
hubs
€m
2030
Low NP 950 0 261,618 262,568 262,568
Low GC 1,012 85 261,593 262,605 262,690
Low GPC 994 85 261,601 262,595 262,680
Ambitious NP 2,340 0 260,520 262,859 262,859 Ambitious GC 2,363 206 260,304 262,666 262,873 Ambitious GPC 2,367 206 260,201 262,568 262,775
2050
Low NP 3,069 0 320,855 323,924 323,924
Low GC 3,066 210 320,449 323,515 323,725
Low GPC 3,228 210 319,646 322,873 323,083 Ambitious NP 6,144 0 317,566 323,710 323,710 Ambitious GC 6,170 454 316,391 322,561 323,015 Ambitious GPC 6,164 454 315,701 321,866 322,319
Sensitivity discussion
The main scenario design does not allow us to isolate the effect of policy cooperation alone, or the optimal hub selection. To simplify the comparison and have a manageable number of scenarios, the scenarios with policy cooperation includes grid cooperation (GPC), while we have included all four hubs in the cooperative scenarios already in 2030 and regardless of the ambition level for offshore wind power. The results indicate however, that lower costs for offshore wind power might be achieved through policy cooperation even without the construction of advanced hubs, or potentially, through the use of selected advanced hubs. To asses these variations of the main scenario design, four sensitivities have been analysed, to show the effect of:
›
Grid cooperation with only the two southern hubs for both the low and the ambitious scenario (2H-scenarios in Table 5-7)›
Policy cooperation without any grid cooperation for both the low and the ambitious scenario (PC-scenarios in Table 5-7)The results of the first sensitivity indicate that grid cooperation on only two hubs is more cost efficient than including all four hubs in both the low and ambitious scenario, both 2030 and 2050. In 2030, grid cooperation on two hubs is still not cost efficient in the low scenario compared to the national policies scenario as it is 80 million €/year more expensive. In 2050, however, this number is reversed to a saving of 250 million €/year. For the ambitious scenario, grid cooperation on only two hubs is now cost efficient in both 2030 and 2050 and shows annual savings of around 50 million €/year in 2030 and 900 million €/year in 2050. The results show that the configuration, timing and location of hubs matter, and that these options should be explored carefully. Also, the impact on internal grids, which may be beneficial, should be taken into account (see next chapter).
Policy cooperation without grid cooperation provides savings of 65 and 350 million €/year in 2030 in the low and ambitious scenario respectively. In 2050, these numbers are increased to around 1,090 million €/year and 970 million €/year respectively. With one exception, policy cooperation without grid cooperation is also more cost efficient than the corresponding main
scenario, which also included grid cooperation on all four hubs. However, in 2050, the main Ambitious GPC scenario is more cost efficient, than only applying policy cooperation. The results indicate that hubs should be selected carefully, and that the timing and configuration depends on the ambition level for Baltic offshore wind and the level of cooperation.
Table 5-7 Annual aggregated generation costs, sensitivity analysis on cooperation scenarios Baltic
offshore
€m
Hubs
€m
Rest of system
€m
Total excl.
hubs
€m
Total incl.
hubs
€m
2030
Low NP 950 0 261,618 262,568 262,568
Low GC (2H) 984 58 261,599 262,583 262,641
Low PC 934 0 261,569 262,503 262,503
Ambitious NP 2,340 0 260,520 262,859 262,859 Ambitious GC (2H) 2,323 139 260,336 262,659 262,798 Ambitious PC 2,336 0 260,171 262,507 262,507
2050
Low NP 3,069 0 320,855 323,924 323,924
Low GC (2H) 3,042 150 320,481 323,524 323,673
Low PC 3,161 0 319,675 322,837 322,837
Ambitious NP 6,144 0 317,566 323,710 323,710 Ambitious GC (2H) 6,124 370 316,315 322,439 322,809 Ambitious PC 6,119 0 316,623 322,742 322,742 Figure 5-23 Total annual aggregate generation costs for the different scenarios in 2030
Note: The y-axis does not start at zero.
260 261 261 262 262 263 263
billion €/year
Remaining system Baltic offshore Hubs
Figure 5-24 Total annual aggregated generation costs for the different scenarios in 2050
Note: The y-axis does not start at zero.
Pairwise comparison of scenario features
Pairwise comparisons of aggregated costs under the different scenarios helps to illustrate the effect of individual scenario changes. Table 5-8 shows the pairwise comparison of results expressed in relation to the amount of Baltic Offshore wind power and the additional amount of Baltic Offshore wind power. The numbers can be read as changes in aggregated generation cost for each MWh of Baltic offshore wind generation or changes in aggregated generation cost for each additional MWh of Baltic offshore wind generation.
›
Ambitious compared to low scenariosBy comparing aggregate generation costs under the Ambitious and Low deployment scenarios, we see that with national policies the additional deployment of offshore wind power under the Ambitious scenario increases costs in the Baltic Sea Region by 291 Million €/year in 2030, which translates to an additional 12 € per MWh of additional Baltic offshore wind power generation. However, when we look at the 2050 snapshot of the national policy scenarios, the additional buildout of Baltic offshore wind power generation contributes to a reduction in aggregated generation costs of 3 € per MWh of additional Baltic offshore wind generation.
In other words, increased Baltic offshore wind power generation relative to the low deployment case goes from being net costly to net beneficial in the longer term. The reason is that, in 2030, offshore wind power is only competitive relative to other generation technologies in a few areas of the Baltic Sea. Consequently, increasing offshore wind power deployment broadly across the entire Baltic Sea through the use of national targets pushes up total generation costs in 2030. If we had only looked at increased deployment of offshore wind power in the southern part of the Baltic Sea, where deployment costs are lower and the market value higher, there is potentially a net benefit of even higher deployment.
315 316 317 318 319 320 321 322 323 324 325
billion €/year
Remaining system Baltic offshore Hubs
Beyond 2030, as the costs of Baltic offshore wind power fall and there is an increased need for renewable generation in the system, broader deployment of offshore wind power becomes more efficient and contributes to lower aggregate generation costs overall.
Table 5-8 The effect of individual scenario parameters (e.g. the level of offshore wind power deployment) on aggregated generation costs
€/MWh Million €/year 2030 2050 2030 2050 Ambitious vs. Low deployment scenarios
€/MWh of
additional Baltic offshore wind power
generation
National policies 12 -3 291 -214 Grid cooperation 7 -11 183 -710 Grid and policy
cooperation 4 -12 95 -764
Regional grid cooperation vs. no grid cooperation
€/MWh of total Baltic offshore wind power generation
Low deployment 7 -3 122 -199
High deployment 0 -5 14 -695
Regional grid and policy cooperation vs. regional grid cooperation and national policies
€/MWh of total Baltic offshore wind power generation
Low deployment -1 -9 -10 -642 High deployment -2 -5 -98 -696 Note: Positive numbers show additional cost. Negative numbers indicate a saving.
›
National policy compared to regional grid cooperationA comparison of the national policies and the regional grid cooperation scenarios shows that deploying all four advanced hubs implies an additional cost of 122 million €/year in 2030, translating to an increase in aggregated generation costs of 7 € per MWh of Baltic offshore wind power generation in 2030 under the low deployment scenario. The reason is that the benefits of better system integration (visible in the form of decreased costs for the remaining generation in the system) are not high enough to offset increases in cost due to both the use of sites in deeper waters and the need for HVDC offshore stations and connections.
Beyond 2030 and at higher deployment levels, we see the hubs bring a net benefit that translates into an average saving of up to 5 € per MWh of offshore wind power generation.
Looking at each of the hubs in isolation based on an assessment of the marginal impacts of altering wind power generation and transmission capacity at these locations, we find that the hubs in the southern region (connecting Sweden and Germany, and Sweden, Poland and Lithuania) yield lower aggregate generation costs even in 2030. However, these benefits are not apparent in the headline results because they are offset by the increase in costs brought about by the other two hubs. Again, this suggests that the timing and configuration of hubs should be carefully examined.
›
National policy compared to policy cooperationBy comparing the GC and GPC scenarios, we can identify the effect of cooperation on offshore wind power deployment that is not included in the hubs. The results show that such cooperation contributes to lower costs regardless of the deployment level or the year examined. This is to
be expected since such cooperation allows us to use the cheapest offshore wind power sites at the locations with the highest market value across the Baltic Sea – irrespective of the distribution of national targets. As illustrated in section 5.2.2 both the LCOE of offshore wind power and the market value of generation vary substantially across the Baltic Sea region. The additional benefit from cooperation amounts to between 1 and 9 €/MWh of Baltic offshore wind power generation.