Opportunities for the Development of the North Sea Energy Basin What role for coordination? What can Oxford do to help? Oxford, October 5th, 2015 Brendan DEVLIN European Commission DG Energy

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Substantial amount of low-carbon, indigenous resources close to energy intensive regions

Source: Stanford University, European Commission

Wind Potential Gas Resources Marine Energy

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Not comparable at all…….

DE Day Ahead Baseload Trade

date . 37.1

UK Power Exchange Spot

Price . 54.7

[EUR/MWh] Source EMOS 1/10/2015

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•  Facilitate Trading between countries around the North Sea

•  Projects of Common Interest (permitting, regulatory measures, finance)

•  Study on Cost Benefit Analysis of meshed grid

•  Cross Border Cost Allocation

•  Promote stability of the regulatory regime (reduce the revenue risk)

•  Increase value of existing assets by giving value to traded electricity

Development of interconnectors

Thermal Power Optimisation: Natural

Gas

Optimal grid design- resolution of onshore

bottlenecks

Removal of development barriers

Regional Balancing / Price Reduction

Role of the European Commission (third-party proposals)

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EC's Role in the North Sea Energy System

•  Facilitate exchange between technology developers •  Coordinate standardisation •  Financial support (FP7, Europe 2020)

•  Alignment of the regulatory regimes in the North Sea •  Development of a dedicated legal framework •  Strategic Environmental Assessment

•  Infrastructure/PCI process (financing, permitting and regulatory tools)

•  Study on grid design, cost/benefits

•  Development of risk mitigation instruments •  Promote stability of the regulatory regime (reduced

revenue risk)

Wind Turbine Generator cost compression

Coordinated grid development

Removal of development barriers

Optimization of risk profile

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Meshed Offshore Grid to support RES integration and regional trade at least cost

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Sizing the investment opportunities

120

100

80

60

40

20

100GWe 67GWe 51GWe

Meshed grid investment cost under different offshore wind scenarios, € bln

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PwC-Ecofys-TE

2014 study: there is a sound case for a meshed and coordinated development of the North Sea offshore grid

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•  The investment costs are EUR 4.9 to 10.3 billion higher for the coordinated approach (mostly due to offshore substations)

•  The annual savings due to reduced CO2 emissions and generation savings are EUR 1.5 to 5.1 billion for the coordinated approach. These monetized benefits make the meshed grid profitable in all scenarios

•  Coordination between states for reserve capacity could lead to one-off additional EUR 3.4 to 7.8 billion generation investment cost reductions

•  These benefits will not materialize without strong coordination between Member States

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Benefits of a coordinated development outweigh larger upfront investment costs

€4.9 to 10.3 billion investment cost reduction

€1.5 to 5.1billion annual generation savings

€3.4 to 7.8billion generation investment savings

Coordinated approach

Business as usual

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•  Framework at state level (Intergovernmental Agreement - IGA)

•  Member States to lead, Commission to facilitate

•  Strong political support at inception until infrastructure delivery

•  Once legal framework, lex specialis requires light political oversight.

•  Simple, fit for purpose, clear time-limits

•  Ensures revenue irrespective of developments ('floor')

Ideas for framework for the successful development of the North Sea Energy System

Legal Framework

Regulatory Framework

Political Framework

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Political Framework

Local

Regional

National

North Sea

European Union

Industrial

NSCOGI / OSPAR

North Sea Commission

National Cost Reduction Programmes

Research Programmes

Regional Development Programmes

Certification and Regulatory Bodies

Co-ordination