SIF R3 Discovery - LookNortH2: Offshore Energy Islands (Partner)

Project Summary

Offshore Energy Hubs (OEH) integrate electricity/hydrogen production offshore between the UK and other European countries. OEHs could stimulate UK offshore wind rollout potential and support the development of a hydrogen economy. Many European TSOs are exploring this concept, but the UK is yet to fully consider this.

This project will explore potential benefits and associated costs of developing OEHs in the UK, developing scenarios that quantify benefits such as curtailment reduction, grid losses reduction and infrastructure optimisation.

Future phases will explore what commercial models and market designs are needed to integrate OEHs into the whole energy system and with Europe.

Innovation Justification

Innovative Aspects

The design of novel market approaches to govern and harmonize the integration of Offshore Energy Hubs (OEH) into the UK and EU systems are the core innovative aspects. This will involve new market framework design, new processes, and potentially new market tools.
While the EU-UK Trade and Cooperation Agreement recognises the benefits of offshore energy production in the North Sea, there are currently no joint commercial frameworks in place that optimise the governance and integration of offshore cross-zonal electricity/hydrogen grids development. This project how it considers offshore hydrogen-electricity interaction and EU/UK harmonization by identifying regulatory gaps and risks between the UK and EU.
Beyond incremental innovation.

The Cost-Benefit-Analysis (CBA) methodology, as well as market frameworks developed for the North Sea Wind Power Hub (NSWPH) will be leveraged and adapted to the UK context.

Readiness Levels

TRL: 1 progressing 2
The concept of OEHs is still nascent for the UK. Through initial research including testing several concepts designs, their location and their feasibility, this Discovery phase project will be progressing the concept to Basic Research (TRL 2).

IRL: 2 progressing 3
This project is compatible with existing technological research, such as the
Hydrogen Turbine 1 (HT1) pilot project, as well as the European research efforts through the NSWPH. By exploring how UK OEHs could integrate existing technological research, the discovery phase will demonstrate the compatibility between technologies and framework to orderly and efficiently integrate and interact (IRL 3).

CRL: 1 progressing 3
The current product is not functional without a clear route to market (CRL 1). The aim of this project, throughout all phases, is to develop all the elements enabling the commercialisation of OEHs, thus progressing CRL to 6. In Discovery, CRL is expected to progress to 3.

Size and Scale
By exploring the concept and benefits of OEHs, as well as the processes needed to enable its implementation, this project is sized to progress the solution towards commercialisation and unlock the SIF objectives such as curtailment reduction, without incurring the budget needed to implement it.

BAU
This project investigates how energy networks should adapt to potential long-term system development. Thus, this cannot be funded as part of price control or short-term BAU activities.

Counterfactual
The proposed innovation is novel, therefore has risk associated with the delivery. Itis dependent on the development of a future UK hydrogen network, but also similar developments in Europe

Impacts and Benefits

Further work is required to progress the commercial codes and regulations required to unlock the development of a cross-zonal offshore whole system economy. For this project, the key metrics used will be financial cost savings stemming from curtailment reductions (£ associated with MWh saved), reduction in grid losses (£ associated with MWh saved), and in infrastructure overbuild reduction thanks to the development of Offshore Energy Hubs in the UK (£associated with MW of infrastructure saved).

Financial - future reductions in the cost of operating the network:
The supply-side optionality provided offshore to developers through Power-to-Hydrogen and greater interconnection with Europe, could significantly reduce offshore wind curtailment, hence reducing constraints payments for the electricity system operator, that are foreseen to reach over £2.5bn/year over the next decade.
Better coordination between offshore hydrogen development and onshore hydrogen grid would facilitate and optimise hydrogen TSO operation.

Financial - cost savings per annum on energy bills for consumers:
As mentioned, a significant decrease in constraints payment will reduce consumers bill across the UK.
Better coordination between offshore and onshore hydrogen infrastructure development could reduce the potential for overbuilding infrastructure, hence providing savings on non-energy costs for customers.
Increased supply-side flexibility for offshore wind developers could help significantly reduce wholesale price volatility. Thus, reducing peak energy prices that particularly impact vulnerable consumers.

Revenues - creation of new revenue streams:

Offshore Energy Hubs can provide additional revenue streams for offshore wind developers through power-to-hydrogen, as well as the potential to export energy to Europe.

Environmental - carbon reduction -- indirect CO2 savings per annum:
Additional revenue streams for offshore wind projects could accelerate the pace and scale of such developments by strengthening developers' business case.

New to Market -- Product, Process and services
This project will focus on the creation of new market products, processes and/or services that unlock the above benefits through enabling and optimising the development of cross-zonal Offshore Energy Hubs. The direct benefits realised through project delivery are the creation of new to-market products (e.g., joint Offshore Bidding Zones), processes (e.g., co-optimised maritime spatial planning and permitting), and/or services that create new revenue streams for offshore wind developers, incentivising them to invest into Offshore Energy Hubs.

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