Offshore wind power market values in the North Sea-A probabilistic approach

Offshore wind capacity is expected to grow significantly in North Sea countries over the next decade. This study analyses the expected market value and economic potential of offshore wind developments for various grid connection strategies using the Norwegian continental shelf as a case. The economic analyses rely on an energy sector model with a fine temporal and spatial resolution that covers the Northern European power and heat market. The novelty of this study is that it explicitly addresses uncertain economic and political developments, which are incorporated through Monte Carlo simulations. The highest market values are obtained for wind parks with 3 GW installed capacity if allowed to flexibly transmit electricity to several markets with a market value of 39 +/- 3 euro/MWh. The least profitable alternative is a wind park connected radially to Norway, which has a market value of 30 +/- 2 euro/MWh. We find a substantial reduction in the value factor from 1.02 +/- 0.03 to 0.94 +/- 0.02 when increasing the offshore capacity from 3 GW to 8 GW. The economic potential of Norwegian offshore wind, i.e., the profitable investment level without subsidies, is estimated to be 2.8 +/- 1.1 GW. The market value of offshore wind power increases substantially if the wind installations are connected to several markets.