Improving cost efficiency in offshore wind

A new Frontier study on behalf of the German Offshore Wind Energy Association (BWO) and the German Association of Energy and Water Industries (BDEW) shows that economically optimal overplanting of offshore grid connections can be an effective lever for a cost-efficient expansion of offshore wind.

Germany plans to increase offshore wind capacity to 70 GW by 2045. According to the Grid Development Plan, this will require EUR 153-171 billion of investment in offshore grid connections. In addition, the build-out triggers further investment in the onshore network. Grid integration is therefore a key driver of the overall cost of offshore expansion.

Model-based assessment of optimal overplanting

The study examines what level of overplanting of offshore wind farms is economically efficient. In this context, overplanting means that the installed wind capacity is higher than the grid connection capacity. We calculated the combination of wind farm capacity and grid connection capacity that minimises integration costs (investment and capital costs minus electricity market revenues).

For four reference areas from the current Site Development Plan, we modelled two expansion scenarios for 2045:

Baseline scenario: Expansion in line with the Site Development Plan, reaching 70 GW of offshore wind in Germany.

Optimised scenario: Higher full load hours for offshore wind farms through lower power density, based on prior work by Fraunhofer IWES.

We assess both:

a system (economic welfare) perspective, which jointly optimises generation and grid infrastructure, and

a commercial (firm-level) perspective of an offshore wind farm operator, which considers only its own costs and revenues.

From a commercial perspective, the incentive to overplant is to increase utilisation of the grid connection and, therefore, the volume of electricity sold per unit of offshore wind capacity invested.

Key findings

Economically optimal overplanting reduces system costs by lowering grid connection capacity.
For the areas assessed, the economically optimal level is around 5-10% overplanting. Depending on market developments, the optimal level can be higher or lower. A mandatory overplanting requirement above the economic optimum leads to higher system costs.

Developers already have incentives to overplant, but at levels below what is economically efficient.
The optimal level of overplanting on a firm-level for the areas assessed is around 3-5%, and generally below the economic optimum. A requirement set at the economic optimum would therefore worsen the commercial position of offshore wind farm operators and may require a compensation mechanism.

Location and cost drivers are decisive.
Optimal overplanting is area-specific and depends strongly on factors such as the wind profile and full load hours, the distance to the grid connection point, and the relative costs of wind farms and grid connections.

Overplanting is one lever to optimise the economic potential of offshore wind, but not the only one

Lower power densities reduce wake losses and increase full load hours. Capacity can also be balanced through international cooperation (as explored in the Fraunhofer IWES study on an optimised expansion pathway). Alongside a pure capacity target (for example, 70 GW), a stronger focus on energy delivered can support a more efficient offshore build-out.

De-risking measures and the realisation of scale effects in manufacturing can reduce investment costs for offshore wind farms and offshore grid connections.

Offshore sector coupling, for example transporting energy as hydrogen, can unlock transport cost reduction potential and create additional flexibility in the energy system.

Wind generation profiles and optimal overplanting for the analysed areas and scenarios