The dormant market for offshore wind power in Sweden can now finally be revived. As part of the Swedish Energy Agreement of 2016, the Government has now presented a proposal to reduce the grid costs for offshore wind power. Once the proposal is adopted and the regulation is in place, very high activity in offshore wind power will commence and this will last for a long time to come.
“More offshore wind power will contribute to the balancing of the power system and be an important addition to the electricity market,” says the Swedish Minister for Energy, Anders Ygeman.
We’ve assessed the offshore wind projects currently under development and see great potential. The installed capacity of operating offshore wind farms in Swedish territorial waters is only about 160MW, but the development portfolio is around 100 times that. To accelerate the delivery of the development portfolio, it’s vital to clarify the conditions for the construction of such wind farms now. “It can take 10 to 15 years to get offshore wind farms in place. However, projects already given the necessary permits might be commissioned earlier,” says Henrik Sjöström, Manager for Offshore Wind at OX2.
The Government is proposing that the Swedish Transmission System Operator (TSO), Svenska kraftnät (Svk), constructs the transmission network to areas within Swedish territorial waters. All customers connected to the Swedish grid will share the financing, so the connection costs to the transmission network will fall for offshore wind developers, enabling profitability for more projects. The Government wants the change to come into force on 1 August 2021, and a period of consultation ended on 3 May 2021.
The growth of the transmission network should take place in areas where there are good conditions for connecting several electricity production facilities and where such an expansion would promote the fulfilment of Sweden’s goal of 100 per cent renewable electricity production. The model is judged to be compatible with EU state aid rules. Svk will be responsible for the planning, design, construction and operation of cables. It will be up to them to assess how far out to sea and in which places it is appropriate to build stations for connecting to electricity production at sea. The fact that Svk will decide where to build transmission lines provides an effective measure for counteracting less cost-effective locations for wind farms.
The Government thinks the proposal is a reasonable balance between the interests of electricity producers and customers. However, it’s hard to predict the exact impact of the reform in terms of growth in offshore wind power. We’ve talked to some of the offshore wind power developers and they’re cautiously positive. Even though the cost of the grid connection is a substantial part of the total investment, there are other factors with greater impact on the final profitability. Future electricity prices, technology development and capital costs are some key factors. But Henrik Sjöström at OX2 is very positive. He believes the proposal will close the gap, allowing profitable projects. He thinks the future output will be secured by a combination of long- and short-term contracts, leading to lower financing costs. In addition, the construction risks of installing offshore wind farms are of a controllable level. This, in combination with lower capital expenditure (CAPEX) and technology development, will lead to sustainable profits.
For Svk, the proposal means broader responsibilities than before. The state-owned TSO is already under pressure and working with large investment plans, even before the new instructions to build transmission networks to the sea. They will certainly require additional resources. Sjöström emphasises the importance of collaboration between the offshore wind power developers and the TSO to reach the goals of co-creation. “The connection can’t take too long because the technology development then makes the permits outdated. The time to secure a connection needs to be short,” says Sjöström.
One consequence for society will be an increase in transmission network tariffs. The increase will have an impact on customers in the regional grid as well as in the local grid. The Government has provided an example, saying that an increase in transmission network tariffs of 20 per cent, or SEK 5 billion, during a regulation period (four years) would hardly be noticeable for a normal household customer as their network fee would only increase by about half a per cent.
|No.||Site||Owner||No. of Turbines||Development Status|
|1||Storgrund – phase 2||Rewind Offshore AB||10–12||Early Planning|
|2||Storgrund – phase 1||Rewind Offshore AB||10–12||Early Planning|
|3||Eystrasalt||wpd AG||150–200||Early Planning|
|4||Fyrskeppet||wpd AG||75-100||Early Planning|
|5||Gretas Klackar||SVEA Vind Offshore||62||Early Planning|
|6||Gretas Klackar II||n/a||50||Consent Application Submitted|
|7||Utknallen||SVEA Vind Offshore||55||Early Planning|
|8||Storgrundet||WPD offshore GmbH||50–83||Consented|
|9||Utposten II||SVEA Vind Offshore||50||Consent Application Submitted|
|10||Utposten||SVEA Vind Offshore||25–40||Consent Application Submitted|
|11||Svenska Björn Offshore||Solid Vind AB||66||Consent Application Submitted|
|12||Långgrund||SVEA Vind Offshore||n/a||Early Planning|
|13||Långgrund II||SVEA Vind Offshore||n/a||Early Planning|
|14||Södra Klasgrunden||Cloudberry Develop AS||n/a||Early Planning|
|15||Fällbådan||Rewind Offshore AB||n/a||Early Planning|
|16||Oskarshamn||Rewind Offshore AB||40–45||Early Planning|
|21||Södra Midsjöbanken||RWE Renewables||120||Consent Application Submitted|
|24||Skåne North||Ørsted||n/a||Early Planning|
|27||Sydkustens Vind||Kustvind AB, Magnora AS||50||Early Planning|
|28||Kriegers Flak II||Vattenfall AB||32–80||Consented|
|30||Kattegatt Offshore||Agrivind AB||28-47||Consented|
|32||Stora Middelgrund||Vattenfall AB||47–75||Early Planning|
|33||Sotenäs Offshore Park||Flowocean AB||1||Consented|
The proposal means Svk will expand the transmission network at sea in places where several electricity producers will be able to connect. As with the reinforcements made on land, the TSO will make assessments of where and when to build lines from a system perspective. This means some areas will be more attractive than others. Offshore wind farms located in areas requiring major investments in the transmission grid will most probably not be successful.
We’ve examined the available information about offshore wind power development in Swedish waters and summarized it in the map above. The projects we’ve chosen to present are in different stages and the developers include everything from the world’s dominating offshore wind actor, Ørsted, to very small companies such as SVEA Vind Offshore. We estimate the total pipeline to be around 2,000 turbines. However, given that technology development constantly increases the size of wind turbines, the total number of turbines will be less at time of construction. Our analysis suggests 300 turbines (3–4GW in 2030) are in the zones
where cost-effective connections are most likely. Svk will most probably prioritise these projects due to available transformer capacity (400kV). The substations in Ringhals on the west coast and in Oskarshamn on the east coast have spare capacity because two reactors are undergoing decommissioning at each site. Ringhals 1 and 2 had an installed capacity of about 1.8GW and Oskarshamn 1 and 2 had an installed capacity of about 1.1GW. The third connection point to highlight is Karlshamn, where Karlshamnsverket is part of the Swedish capacity reserve. In the longer term, the oil-fired power plant will be decommissioned and the substations could provide spare transformer capacity of about 1GW. The total spare transformer capacity would be sufficient to connect up to 4GW.
In addition, Kriegers Flak II has plans for a connection that would lead to an increased transformer capacity in Arrie. So, offshore wind farms close to Kriegers Flak II could be considered as cost-efficient connections.
It’s possible, then, that considerable wind power in price areas three and four might be possible to connect without the TSO installing new transformers on land. This also means that the capacity in the transmission network is sufficient and there’s no need for reinforcements.
5GW of installed offshore wind power capacity would add about 15 per cent of yearly electricity production to the Swedish system compared to today – a realistic target in 10 to 15 years’ time.
“What we are seeing now is the starting point for a bright future of offshore wind development in Sweden,” says Henrik Sjöström.
Explore our latest insight and perspectives on the Nordic Energy market