1) A meshed offshore grid connecting the countries of the North Seas region could save €25-75 billion in infrastructure costs over 25 years by increasing efficiencies compared to the current approach. 2) Coordinating offshore wind and grid development could increase savings to €30-80 billion and lower the risk of stranded assets compared to separate country-by-country planning. 3) European leaders need to establish high-level cooperation on a North Seas Offshore Grid, including a financing vehicle, to realize these benefits and deliver on decarbonization goals.

1. INTERCONNECTION
AND THE
NORTH SEAS GRID
THE BENEFITS OF A COORDINATED APPROACH

2. “Cross border transmission
capacity connecting different
countries”
Interconnection means...

3. It helps solve the energy ‘trilemma’
Security
DecarbonisationAffordability
by lowering bills for households
and businesses
by ‘keeping the lights on’ and reducing
reliance on imported fossil fuels
by cutting greenhouse
gas emissions

4. Britain’s electricity market
currently has 4GW of
interconnector capacity:
1. 2GW to France (IFA)
2. 1GW to the Netherlands (BritNed)
3. 500MW to Northern Ireland (Moyle)
4. 500MW to the Republic of Ireland
(East-West)
Britain’s current interconnection
1
2
3
4

5. Connection agreements with National Grid = 5.8GW
- 2.8 GW to Norway (NorthConnect + HVDC Norway-UK)
- 2 GW to France (ElecLink + IFA2)
- 1 GW to Belgium (Project NEMO /Belgium Interconnector)
Other proposals = 3.8GW
- 1.4 GW to Denmark (Denmark Interconnector)
- 1.4 GW to France (FABLink)
- 1 GW to Iceland (IceLink)
13.6 GW
in potential
interconnection
New interconnectors are planned
Current interconnectors = 4GW

6. New interconnector plans
Other proposed interconnectors
Proposed interconnectors with
connection agreements with
National Grid
Icelink
NorthConnect
HVDC
Norway
Denmark Interconnector
IFA 2
ElecLink
Project NEMO/ Belgium Interconnector
FABLink
Adapted from Policy Exchange (2014)

7. • More interconnection
reduces reliance on
imported fossil fuels and
helps balance renewable
energy sources by
providing flexibility
• As Britain faces a security
crunch, interconnection
helps bring down energy
prices
Benefits I: Security
As interconnection increases supply,
the price falls
price
supply
demand
volume
Supply
+ IC
IC volume
price
reduction
Importing region
Additional consumer surplus
Adapted from Policy Exchange (2014)

8. Benefits II: Decarbonisation
• 6GW of extra interconnection means three
fewer gas-fired power plants (3GW)1
• Additional interconnection capacity
reduces fossil fuel reliance depending on:
- Gas price
- Level of capacity in exporting market
• Interconnection with Norway and Iceland
scores best because they have large
volumes of hydro and geothermal capacity
1
Poyry (2014)

9. Benefits III: Affordability
• In the long-run, interconnection reduces
reliance on volatile fossil fuel prices
- A doubling of current capacity by
2020 would unlock benefits for British
energy consumers through reduced
wholesale electricity prices of up to
£1 billion per year.2
- This saving could result in a reduction
in household bills of £13 per year.3
- Increasing the amount of
interconnection causes prices to fall by
2-3%.4
• Interconnection is cheaper than other
forms of new capacity
2
National Grid (2014) 3
Policy Exchange (2014) 4
Poyry (2012)
Cost of capacity (£/MW)
Interconnectorlow
Interconnectorhigh
OCGT
CCGT
Nuclear
Onshorewind
Offshorewind
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Adapted from Policy Exchange (2014)

10. But Britain isn’t the only
country realising these
benefits

11. Two futures are possible
Radial Meshed solution

12. Advantages of a meshed solution I
Meshed (or networked) systems reduce costs by increasing efficiencies.
• An integrated approach to the development of the North Seas Grid leads
to €25 to €75 (£19 to £56) billion of savings in operation and network
investment costs over the next 25 years.5
• In context: over €100 (£75) billion is already planned for investment in
power transmission infrastructure in the North Seas region over the next 15
years.
A flexible but planned approach reduces the risk of incurring stranded
assets. The potential regret associated with ‘over-building’ the grid of €1
(£0.75) billion is much lower than the regret associated with ‘under-building’
the North Seas Grid for fear of low amounts of offshore wind generation
being developed of €30 (£22) billion.6
5
Imperial College and E3G (2014) 6
Ibid

13. Advantages of meshed solution II
The private market is historically poor at building networks
• The UK rail network was almost entirely privately delivered during the
C19th.
• A “battle of the gauges” took place and was won by Stephenson against
Brunel. Today we have a uniform narrow gauge which means trains are
slower because their centre of gravity is higher.
• A free market approach contributed to a ‘dash to London’. There are now
18 major rail stations in an area of central London measuring just 6 by 4
miles.
• Tracks cross each other to reach these stations.

14. The benefits for Europe are clear
• In time, increased interconnection could lead to a North Seas Grid -
connecting Belgium, Denmark, France, Germany, Ireland, Luxembourg, the
Netherlands, Norway, Sweden and the UK.
• There is a particular benefit to these countries if the amount of offshore
wind in the North Sea increases from 5GW to as much as 150GW.
• Estimates of benefits:
7
Policy Exchange (2014) 8
European Commission (2014) 9
E3G (2014) 10
Ibid
»» Much deeper interconnection across Europe could yield savings on the
Europe-wide cost of decarbonisation of up to €426 (£318) billion between
2020 and 2030.7
»» Annual net benefits of integrating the European electricity benefit could reach
€12.5 to €40 (£9.3 to £29.9) billion by 2030.8
»» Savings could be €25 to €75 (£19 to £56) billion in the period to 2040,
compared to the current incremental member-state approach.9
»» A proactive approach that plans offshore wind locations at the same time as
grid design could increase these benefits to €30 to 80 (£22 to £60) billion.10

15. Business as usual in the North Sea is leading to a radial grid
Existing interconnections
Connections to offshore wind farms
Adapted from Cole et al (2014)

16. Progress has been steady but slowDec2009
Dec2013
July2014
Oct2014
North Seas
Countries’
Offshore
Grid Initiative
(NSCOGI)
established.
European
Commission
publishes
‘Vision of an
interconnected
Europe’ Energy and
Climate
Change
Committee
publishes ‘A
European
Supergrid’
DECC
publish ‘More
interconnection:
improving energy
security and
lowering bills’ European
Commission
publish ‘Study of
the benefits of a
meshed offshore
grid in Northern
Seas Region’
European Council
conclusions:
“urgent measures in
order to ensure the
achievement of a
minimum target of 10%
of existing electricity
interconnections, as a
matter of urgency, and no
later than 2020”
“objective of arriving at
a 15% target by 2030,
as proposed by the
Commission
March2011
March2011

17. So what now?

18. What Britain and Europe need to do
Take a lead in brokering agreement between
Member States on North Seas Offshore Grid
Establish a high-level
Ministerial body for
cooperation on North
Seas Offshore Grid
Initiative Push for free trade
zone for North Seas
Deliver as part of Commission
President Juncker’s €300 (£225) billion
‘Jobs and Growth’ package
Create a special purpose
financing vehicle
Deliver intergovernmental
agreement on
interconnection and
North Seas Grid
specifically
Make a core part of the
Energy Union and major focus
of work for Commissioner
Canete and Commissioner
Sefcovic

19. References
Cole S et al (2014) Study of the benefits of a meshed offshore grid in Northern seas region: Final report European Commission
DECC (2013) More interconnection: improving energy security and lowering bills Department for Energy and Climate Change
Moore S (2014) Getting interconnected: How can interconnectors compete to help lower bills and cut carbon? Policy Exchange
National Grid (2014) Getting more connected: The opportunity from greater electricity interconnection A paper by National Grid Interconnectors
Poyry (2012) Impact on EMR of interconnection: A report to the Department for Energy and Climate Change Poyry Management Consulting.
Strbac G et al (2014) Strategic Development of North Sea Grid Infrastructure to Facilitate Least-Cost Decarbonisation Imperial College London and E3G