An Economic Model for Offshore Transmission Asset Planning Under Severe Uncertainty

Bains, Henna; Madariaga, Ander; Troffaes, Matthias C.M.; Kazemtabrizi, Behzad

Abstract

The inherent uncertainties associated with offshore wind are substantial, as are the investments. Therefore, investors are keen to identify and evaluate the risks. This paper presents a model to economically evaluate projects from an offshore transmission owner's perspective by considering the revenue streams, capital costs, and operational expenditure. To allow a more realistic economic evaluation, data, regulatory information, and expert knowledge are collected, curated and, where necessary, combined with statistical techniques. A generic 1.2 GW project is used as a case study. This research contributes to a deeper understanding of the severe uncertainties involved in offshore transmission planning and their impact on a project's expected profit. Understanding their impact, through a sensitivity analysis where individually one factor is varied within an interval, supports informed decision making with limited information. Uncertainty in interest rates, planned operational expenditure and, particularly, cable failure rates were found to be critical to an investor's return. For the case study considered, comparing cable failure rates based on operational experience to inputs based on literature, resulted in a 64.2% lower net present value. In conclusion, further research into cable failures, and addressing the uncertainty in inputs used for economic evaluations could be beneficial to the industry.

Citation

Bains, H., Madariaga, A., Troffaes, M. C., & Kazemtabrizi, B. (2020). An Economic Model for Offshore Transmission Asset Planning Under Severe Uncertainty. Renewable Energy, 160, 1174-1184. https://doi.org/10.1016/j.renene.2020.05.160

• Journal Article Type: Article
• Acceptance Date: May 29, 2020
• Online Publication Date: Jun 29, 2020
• Publication Date: 2020-11
• Deposit Date: May 29, 2020
• Publicly Available Date: Jun 29, 2021
• Journal: Renewable Energy
• Print ISSN: 0960-1481
• Electronic ISSN: 1879-0682
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 160
• Pages: 1174-1184
• DOI: https://doi.org/10.1016/j.renene.2020.05.160
• Public URL: https://durham-repository.worktribe.com/output/1301091