IEEE Power & Energy Magazine - July/August 2015 - 73

Operation

90

Network Investment

80
70
60
Billion

50
40
30
20
10
0

S1

S2

S3

HUB

S4

S1

S2

S3

S4

S1

S2

EN

S3
FI

S4

S1

S2

S3

S4

PRO

figure 11. Savings in operation and network investment costs of different policy approaches when compared to the
radial solution.

approach) to favor capital investment to other smart assetlight alternatives. It would be important to recognize the
benefits that may be associated with the early adoption of
new smart operation practices (e.g., value of learning by
doing) as well as the increased exposure to technical and
commercial risks and that the corresponding benefit and
risk premiums are included in the rate of return applicable
to smart solutions. These policy measures would level the
playing field (between traditional asset-heavy and less costly
smart solutions), remove commercial distortions that may be
hindering direct comparison between competing technologies and encourage TSOs to adopt cost-efficient advanced
operational measures where appropriate. To achieve this,
it may appropriate to consider increasing the rate of return
associated with projects that deliver lower-cost solutions
(e.g., cost-efficient smart measures) compared to more costly
upgrade projects and ensure that such measures are pursued
proactively by TSOs.

The Regulator's Role
Under the current incentives scheme, the Great Britain regulator Ofgem has evolved into a sole buyer of transmission
services. However, this necessitates a progressively in-depth
understanding of transmission planning, extensive cost
benchmarking, and importantly, but increasingly more difficult to achieve, full appreciation of the investment tradeoffs between operational measures, smart grid technologies,
and various asset types. Given the unprecedented level of
transmission investment that is expected to take place, the
risks associated with the decision-making process will also
increase, particularly as uncertainty in timing, location, and
volume of this investment will be significant. In this context, there is consensus developing that regulators' efforts
july/august 2015	

may be better placed in the design and oversight of the
investment framework itself to ensure that the proper incentives are given to network operators and users so that the
most cost-efficient solutions emerge endogenously without
table 3. Range of policy approaches
and their key characteristics.
Approach

Key Characteristics

Radial

*	 I- ncremental connection of offshore wind
projects to shore
*	 Offshore-to-offshore connections not
considered
*	 Member states are net energy neutral and
self secure

Hub

*	 Strategic connection of offshore wind
clusters to shore
*	 Offshore-to-offshore connections not
considered
*	 Member states are net energy neutral and
self secure

Integrated
energy
neutral

*	 Offshore-to-offshore connections
considered
*	 Member states are net energy neutral and
self secure

Fully
integrated

*	 Offshore-to-offshore connections
considered
*	 Unconstrained cross-border electricity
trade
*	 EU wide security

Fully
integrated
proactive

*	 Offshore-to-offshore connections
considered
*	 Co-optimization of network and generation investment
*	 Unconstrained cross-border electricity
trade
*	 EU wide security
ieee power & energy magazine	73
Table of Contents for the Digital Edition of IEEE Power & Energy Magazine - July/August 2015
