The North Seas Countries' Offshore Grid Initiative - Initial ... - Benelux

5.1.5 Comparison of Costs and Calculated Benefits of both Grid
Designs
The comparison of costs and benefits between the radial and meshed grid designs is
carried out using readily quantifiable values and as such is seen to be a narrow
assessment of the relative merits of the options considered. The value associated with the
non-quantifiable or less readily available costs and benefits are, for the purposes of this
discussion, not considered.
In accordance with the assumptions used and the agreed scope of the study, the level of
wind generation and their geographical locations in 2030 have been stipulated and the
evaluation is therefore focused on the comparison of network design options.
The separate assessment of whether it is economic to connect the OWPPs as specified in
the Reference Scenario for 2030, or what level of offshore wind generation is optimum, is
not addressed in this evaluation. The starting position for this economic assessment is
therefore that the specified OWPPs are deemed connected and costs associated with
providing the OWPPs with connections need to be excluded from this assessment. The
default design configuration for the integration of the OWPPs was assumed using a radial
design configuration. Under the exercise the simple approach was chosen to assume that
the connection costs of the offshore wind parks in the radial case are the reference costs
for connections applicable in both cases. These costs are therefore subtracted from the
totals of both designs.
In reality, some wind parks in the meshed design will be connected partly through direct
links to shore and partly through interconnectors, resulting in a possible reduction of
connections to shore. By choosing to subtract the higher reference connection costs from
the overall meshed design costs, the analysis takes account of this optimisation.
As stated in Section 5.1.4, the benefits that were derived relate to all new grid build other
than the connections of new generation and demand.
The annualised values (annuities) associated with the two network designs are used to
carry out the evaluation. This method is appropriate for the comparison of the relative
economic position of competing alternatives. Given that the way the individual network
designs will be developed is not known at this stage, this method allows the comparison
of economic merits without addressing the issue of the phased development of the
individual networks and the associated phasing of capital expenditure. As such, the
method is suitable to compare competing alternatives, but should not be interpreted as a
means of conducting an investment appraisal.
In order to compare the capital investment costs of each grid design, presented in Section
5.1.3, with the annual production cost savings calculated for 2030, it is necessary to
express the costs as annuities. Full amortisation with an asset life of 40 years and a
discount rate of 6% were assumed for this purpose.
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