Investment incentives and tariff design in a meshed offshore grid context

Abstract

In this research, two regulatory aspects of the development of a meshed offshore transmission grid in the North Seas are analyzed, namely the impact of transmission allocation methods in a meshed offshore grid context, and the economic incentives for transmission system operators (TSO) to invest in this infrastructure. In the first part, theory and practice of transmission charges are analyzed. A mapping of tariff designs in ten countries surrounding the North Seas shows unharmonized procedures that could be a barrier to the development of the meshed offshore grid. G-charges in a meshed offshore solution are also analyzed. In the second part of this study, economic incentives for TSOs are investigated. The analysis is twofold: first, default national regulatory frameworks are considered, followed by the analysis of ‘dedicated incentives’ frameworks. Lastly, the results of the two analysis are combined in a novel way, showing that countries are adopting dedicated schemes to correct deficiencies from the default frameworks. Faced with the choice between measures at the portfolio level and case-by-case level, regulators are opting for the latter to provide TSOs with more incentives for investment in offshore assets. A dedicated framework for incentives may be an alternative for countries to foster the development of meshed offshore grids.