Appendix B
Review of Connection Cost Allocation and network infrastructure pricing Methodologies Cost Allocation Spain
Traditionally in Spain, all network connection costs for new generation were borne by the project developer. As costs have increased substantially—especially with the inception of offshore wind farms—the cost allocation structures in Spain have been adjusted. Currently, Spain has adopted a shallow cost allocation policy for its connection cost allocation structure, where all transmission network upgrades (reinforcement) costs are borne by the TSO and socialized—that is, they are financed through transmission tariffs paid by consumers. Project developers can speed up the process by paying the reinforcement costs upfront to the TSO and getting reimbursed later through consumer tariffs (SOU 2008). By contrast, the costs associated with the connection assets in Spain are typically borne by the project developer based on the agreement with the TSO. There are instances in which a semi-shallow cost allocation policy has been applied and the costs have been shared between the project developer and the TSO, although this is generally not the case and overall cost allocation policy remains shallow. In instances where multiple generations are connected in the same area, the costs for these reinforcements are shared between the different project developers according to the connected capacity. Germany
Germany, similar to Spain, has incorporated a shallow cost allocation policy for cost allocation structures associated with connecting renewable generation to the existing transmission network. Project developers in Germany are responsible for all enabler facilities and system extension, while the TSO is responsible for all network upgrade (reinforcement) costs. The TSO is also responsible for all additional costs if it chooses to connect the renewable project elsewhere other than the closest existing grid connection. However, such is not the case when it comes to offshore wind parks that can warrant significant investment in system extension to connect with the existing network. Any wind park erected three nautical miles seaward in Germany is considered offshore. German regulators have incorporated a super-shallow cost policy, where costs associated with network upgrades and system extensions inland for offshore wind parks are shared by all transmission companies (SOU 2008). All TSO costs for network upgrades are socialized and can be recovered through higher network consumer tariffs. 126