Mitigating Revenue Losses of a Wind Farm in an Offshore Bidding Zone

Abstract

This study addresses the revenue losses from network congestion of an Offshore Wind Farm (OWF) resulting from the implementation of an Offshore Bidding Zone (OBZ) and explores potential measures to mitigate these effects. The quantitative analysis involves a model that simulates a hypothetical OWF located in the North Sea between Norway and the Netherlands, operating with historical electricity prices and wind data. The OBZ approach is compared with the traditional home market approach to analyse revenues and explore the magnitude of the losses. The implementation of mitigation measures provides insights into their impact on revenues, congestion rents, and compensation. Additionally, the role of long-term contracts is examined to clarify how they influence the effectiveness of these measures. This is followed by an exploration of the different perspectives of the wind farm and the government to understand how these could shape the OBZ market design. Finally, an analysis of different future alternative market connections is conducted to understand their implications and the trade-offs that must be made for designing the OBZ market. In the end, the following research question is answered: How can revenue losses from network congestion of wind farms be mitigated in an offshore bidding zone in the North Sea?