Build offshore wind farms, transmission separately

LARGE QUANTITIES OF OFFSHORE WIND ENERGY are on the horizon in Massachusetts, New York, and New Jersey, as state governments have recognized that offshore wind power is not only clean and renewable but an abundant and increasingly competitive energy source.

While the Northeast US looks to generate about 7,500 megawatts of offshore wind power in the next 10 years, Europe expects to have 25,000 megawatts of capacity by 2020. As an executive at the Dutch-German transmission system operator TenneT, which has been in the middle of a remarkable renewable energy transformation, it’s only fair to note that Europe, without its own traditional fuel sources, was motivated to experiment with offshore wind relatively early. The continent now is reaping the benefits of that vision. New turbine and transmission technology continues to drive the cost of electricity lower, making Germany and the Netherlands – where TenneT is the leading transmission provider — well-positioned to fully harness the wind and leave nuclear and fossil fuels behind.

The renewables revolution in Germany has also raised questions about its long-term economic viability, as its start was driven by subsidies. But based on transmission solutions provided by TenneT, recent bids for offshore wind generation have been awarded at a zero-subsidy level in The Netherlands as well as Germany. Offshore is now beating onshore wind generation on a levelized cost of energy basis. These are the ultimate signs that the industry has reached the tipping point of affordability.

As the Northeast begins to form its own vision for its offshore wind industry, it’s important to note some of the lessons we’ve learned along the way. Massachusetts, New York, and New Jersey should waste no time planning an offshore system that maximizes competition, scale, and affordability. Policymakers need to recognize that the ocean, if it’s to serve as a dominant energy source, must have its own planned, independent, offshore grid. In other words, governments should think beyond early procurements and insist on infrastructure that can support long-term growth.

It is tempting to listen to wind developers who sometimes make the case that they should build and own the transmission to shore. We have found that this is a shortsighted approach for several reasons. Bundling transmission with wind generation is more costly because it limits competition. It reserves large amounts of the grid to first movers that can develop a wind farm and provide the connection to shore. It doesn’t provide a level playing field for those developers that aren’t in the transmission business — and consumers will pay the price for the lack of competition. Moreover, the onshore number of connections should be minimized for environmental considerations, and a planned offshore grid offers fewer connections and less disruption.

The arguments for splitting grid asset ownership and generation — to create a fair and competitive electricity market —are just as valid for the offshore grid as they are for onshore. Providing a level playing field for competition between offshore generators — based on the lowest cost for society — has been the key driver for the cost reduction of offshore wind in Europe.

And prices promise to continue to fall, in part because wind farms are connecting farther and farther offshore and turbines are growing ever larger and more efficient. Thus, an independently operated grid provides the potential for scale as technology continues to improve and wind developers look for grid connections deeper offshore.

Independent offshore grids, like the ones TenneT has built in the North Sea, have been part of the driving force to turn wind power into a major source of energy and jobs. TenneT already has connected over 5,300 megawatts of offshore wind power, and by 2025 will connect over 10,000 megawatts of capacity from the German North Sea  and 3,500 megawatts in the The Netherlands. We employ more than 3,000 people, and the European offshore wind industry is expected to support over 120,000 jobs by next year.

Only nine years ago, Germany had a mere 40 megawatts of installed power, and prices originally were high. The early bids in the US likely will be high as well. But Massachusetts, New York, and New Jersey should have faith in a vision for abundant offshore wind. As the European experience shows, if governments insist that transmission is built right — shared, independent, and for the long term — scale, competition, and good pricing will follow.

Wilfried Breuer is the managing director of TenneT Offshore GmbH.