North Sea Energy Islands: Impact on national markets and grids

Taking concrete steps towards a carbon-free society, the Danish Parliament has recently approved the establishment of the world's first two offshore energy hubs on Bornholm and on an artificial island in the North Sea. Being the two first-of-their-kind projects, several aspects related to the inclusion of these “energy islands” in the current market setup are still under discussion. To this end, this paper presents a first large-scale impact analysis of offshore hubs on the whole European power system and electricity market. Our study shows that energy hubs in the North Sea contribute to increase social welfare in Europe. However, when considering the impact on each country, benefits are not shared equally. To help the development of such projects, we focus on the identification of the challenges arising from the hubs. From a market perspective, we show how exporting countries are affected by the lower electricity prices and we point at heterogeneous consequences induced by new transmission capacity installed in the North Sea. From a system point of view, we show how the large amount of wind energy stresses conventional generators, which are required to become more flexible, and national grids, which cannot always accommodate large imports from the hubs.