Sweden Tackles Offshore Wind Grid Connection Costs

The Swedish Energy Agency has, on behalf of the government, examined two different models to remove the grid connection costs for offshore wind power.

The first model

The first model entails moving the grid connection point to the offshore wind farm. This means that Svenska kraftnät (The Swedish National Power Grid) would be responsible for the planning, construction, and operation of the undersea connection cable and, hence, for all the costs entailed by the connection. Funding of the measure could be provided through an increased grid tariff.

However, this model would create unequal conditions for onshore wind power in the agency’s opinion, as onshore wind power and other electricity production facilities would continue to pay connection costs. It is also the agency’s assessment that there would be no incentive for wind power producers to select locations that lead to cost-efficient connections if they are not obligated to pay any portion of the connection costs.

The second model

The second model entails the introduction of subsidies to wind power producers for a portion of the connection costs. The agency proposes that this support is limited to covering the undersea cable and associated transformers. This would create conditions more comparable to those of onshore wind power, the agency said.

Another benefit of this model, in the agency’s estimation, is that the total cost of the removal of connection costs would be limited while still retaining an incentive to connection locations that are cost-effective. It is proposed that the subsidies under this model are financed through the introduction of a special surcharge paid by all electricity consumers.

Pros and cons of removing the grid connection costs

Removing the connection costs would lead to a change in the competitive conditions faced by different types of power generation, according to the agency. It would introduce an additional risk factor for stakeholders in the electricity certificate system and a risk of other, new forms of renewable electricity production being unable to compete.

On the other hand, the removal of costs may make Swedish offshore wind power more competitive in the European context, which, given that this would lead to an expansion of offshore wind power, could lead to increased profit margins in electricity production if there are rapid changes in the electricity market that the agency cannot currently predict.

In order to continue promoting the provision of cost-effective energy in the event of a removal of the connection costs, the agency believes that it is important, regardless of which model is chosen, to have some form of selection criteria and minimum requirements for proposed offshore wind projects connecting to the grid.