Elia halts contract signing for energy island due to high costs
Image credit: Elia
Elia Transmission Belgium has announced it is temporarily postponing the signing of the final contracts for Princess Elisabeth Energy Island due to the price increase for high-voltage direct current (HVDC) infrastructure.
The company cites policy and regulatory uncertainties as the main reason for the decision, with the postponement providing time to weigh the changing market conditions and its associated impact on the project.
Specifically, the challenge lies with uncertainty about the HVDC concerter contracts which will connect the third wind farm of 1,400MW and enable development of a hybrid interconnector to the UK (Nautilus project).
Elia said in a statement: “The international tender that Elia has set up for these direct current components shows an overheated supply chain with significant price increases. Although the terms from the supplier involved are comparable to those of other European grid operators, they are – despite our efforts – much higher than our initial estimates.”
According to the grid operator, scarcity in the market, inflation and rising material costs are driving the price increases.
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Concept alternatives
Elia highlighted that the current scenario remains financially viable and postponing the DC portion of Princess Elisabeth Island for a few years will not change the positive ratio of benefits to costs. This, of course, hinges on whether market conditions do not deteriorate further.
While Elia has established risk mitigation strategies based on the current project design, they are also evaluating alternative designs that fit the concept of an energy hub.
However, Elia states that these alternatives were considered in the past but presented less favourably under the market conditions at the time. Also, they come with uncertainties, are subject to the upward evolution of electrical equipment costs and could also negatively affect the downward pressure on electricity prices and the security of supply.
If an alternative design concept is selected, a joint action plan will be needed which will involve the government, the regulator, Elia, the UK regulator (Ofgem) and the UK transmission system operator.
Elia stated: “These are complex analyses that require considerable expertise and are currently being discussed calmly with all stakeholders.”
To realise the HVDC contracts within the set timeframe (by 2032), the chosen supplier gave Elia a deadline to award the proposed contract by mid-February 2025 at the latest.
As Elia will not be awarding the negotiated HVDC contract in February 2025, the HVDC converters will not be built to the original schedule.
The government will now be responsible for making a decision regarding the converter contracts and whether the project concept will need to be revised.
A project of strategic importance
The Princess Elisabeth Island project is crucial to the Belgium’s electricity supply, and in terms of meeting renewable energy targets.
The project was approved by the federal government in 2023 and thus far 60% of the new Princess Elisabeth wind zone has already been implemented.
In 2021, the Belgian federal government decided to more than double the capacity for offshore wind. In addition to the already operational 2.3GW, up to 3.5GW of offshore wind capacity will be added by 2032 via the new Princess Elisabeth wind zone, which consists of three plots (wind farms) that will be awarded to wind developers through a tender process.
The project will allow Belgium to collaborate with other European countries such as the UK and the northern North Sea countries to tap their offshore wind potential and additional interconnections will strengthen the country’s security of supply and provide access to attractive energy prices.
The Island will combine components of both alternating current (AC) and direct current (DC). Elia also aims to connect the island with electricity production abroad in the future via hybrid interconnectors.
The need for cross-border collaboration
The concept of international partnerships, as well as leveraging cross border interconnectors is high on Elia’s priority agenda.
In its 2024 viewpoint study, Elia provides new insights into the benefits of strategic cross-border planning. This kind of planning maximises wind potential and enhances overall efficiencies, in turn bringing down total energy costs for Europe.
According to the Group, Europe must build more interconnectors, as these will balance out the uneven renewable energy distribution across the Union, as well as reach the renewable energy targets set by member states.
Member states will need to work on establishing cross-border connections of all kinds: point-to-point interconnectors (such as KONTEK 400-kV grid connection between the German and Danish power grid), but also newer varieties such as hybrid interconnectors (only one of which has been built so far: the Kriegers Flak – Combined Grid Solution), and crossborder radial connections (which have yet to be built).
Originally published on powerengineeringint.com
