Netherlands: Updated cost projections for the offshore grid

Netherlands

On 22 July, the Minister of Economic Affairs issued a letter updating parliament on the cost of the offshore grid and on the expected cost savings that will result from the appointment of TenneT (the national grid operator) as the offshore grid operator.

Since the five designated tender areas are now closer to shore, TenneT has updated its cost projections for the offshore grid for 2019-2023. According to the updated projections, the total cost of the offshore grid, for an amortization period of 20 years, is estimated to be EUR 4 billion (of which EUR 2 billion are investment costs). This computes to EUR 1.5 cent/kWh, which confirms earlier cost projections and means that TenneT's appointment as the offshore grid operator ensures a 40% cost reduction for the connection of the offshore wind parks and a 10% overall cost savings for offshore wind energy.

This 10% overall costs saving consists of cost savings for TenneT, due to lower investment costs, lower financing charges and lower maintenance costs as a result of synergy benefits as well as cost savings for the wind parks due to higher connection availability to the offshore grid.

TenneT will set out its investment costs for the offshore grid in an investment plan which elaborates on the framework for the development of the offshore grid to be drawn up by the Minister of Economic Affairs (known as the “scenario”) pursuant to the new gas and electricity bill (STROOM).

The scenario will provide important technical requirements and prerequisites for the offshore grid, such as the choice for the 66kV cable and the maximum 380 MW capacity per site. For more information on the scenario, see our previous publication on STROOM. Operational arrangements between TenneT and the wind park operator will be set out in the connection and transmission agreement.

The offshore grid will be paid for by a direct subsidy to TenneT, funded by the renewable energy budget. TenneT's subsidy will thus not result in an increased transportation tariff. This subsidy will be detailed and submitted to the European Commission for approval under state aid regulation.

If you are interested in learning more about the updated cost projections, please contact the authors.