Optimal Grid Layouts for Hybrid Offshore Assets in the North Sea Under Different Market Designs

Abstract

This work examines the generation and transmission expansion planning problem of offshore grids under different market clearing mechanisms: a home market design, a zonally cleared offshore bidding zone and a nodally cleared offshore bidding zone. It aims at answering two questions. Is knowing the market structure a priori necessary for effective generation and transmission expansion planning? And which market mechanism results in the highest overall social welfare? To this end, a multi-period, stochastic generation and transmission expansion planning formulation is developed for both nodal and zonal market designs. The approach considers the costs and benefits among stake-holders of hybrid offshore assets as well as gross consumer surplus. The methodology is demonstrated on a North Sea test grid based on projects from the European network of transmission system operators' ten-year network development plan. An upper bound on potential social welfare in zonal market designs is calculated and it is concluded that from a generation and transmission perspective, knowing the market structure a priori is not strictly necessary but planning under the assumption of a nodal offshore bidding zone is recommended as it results in the highest overall social welfare and best risk adjusted return.