KPMG’s cost analysis of the energy island confirms unprecedented market prices for HVDC and states that Elia's technical choices are in line with the market

BRUSSELS | At the request of Elia Transmission Belgium's Audit Committee, KPMG is examining the cost estimates and price developments linked to the Princess Elisabeth Island. Its analysis focuses on the information and assumptions that led to certain budget decisions. In an interim report, KPMG identifies various factors that explain the difference between the initial cost estimates in 2021 and the current cost assessment for the island. In addition to some design changes, the increase in the budget has primarily been caused by market changes. As grid operator Elia has already indicated, KPMG’s analysis also notes that the price of high-voltage direct current (HVDC) infrastructure has significantly increased.

In addition to the project’s budget being analysed, KPMG also reviewed the project’s technical aspects. The island’s design as it stood in 2024 has been compared to its design in 2021. KPMG’s analysis points to several significant design changes that, if implemented together, would increase the total cost of the project by €1 billion. Design changes of this kind are not uncommon during a project’s development phase. KPMG also notes that Elia has carefully weighed up the expected costs and benefits of each adjustment. Furthermore, the cost increase is proportionally comparable to what is typical for other offshore transmission networks.

The capacity of the HVDC system has been changed from 1,400 MW to 2,000 MW to comply with the new market standard. Additionally, a so-called ‘single-node’ configuration has been chosen, which allows for operational flexibility and provides the offshore high-voltage grid with the same level of security of supply as the level enjoyed by the onshore grid.

No unilateral decision

Elia emphasises that the aforementioned adjustments were not made unilaterally. The Grid Design was approved in July 2023 by the Belgian Federal Government; at the time, the government was aware of the €3.6 billion budget that took into account the underlying technical choices. Since then, the budget for the project has roughly doubled. This is mainly due to a combination of inflation, rising material costs, and a scarcity of HVDC infrastructure.

Delay of HVDC contracts keeps all options open

Due to this unprecedented price increase, Elia recently announced — after close consultation with the authorities —that it would postpone the decision relating to the HVDC contracts. As the project is of great strategic importance for Belgium and will be crucial for the country’s electricity supply over the coming decades, Elia is aiming to keep all options open by delaying this decision. Elia is calling for a calm debate to be held about this and is ready to fully cooperate with the involved parties to weigh up different concepts and implement appropriate accompanying measures.

Construction of island and AC contracts continue unabated

The Princess Elisabeth Island is one of the most important projects of the Federal Development Plan for the Belgian high-voltage grid, which was approved by the federal government in 2023. Elia is carrying out the project in line with the appropriate legal framework, but is aware of growing concerns about the increased cost of HVDC technology. Meanwhile, the construction of the foundations of the artificial island and the implementation of the previously signed alternating current (HVAC) contracts continue unabated. These will ensure the realisation of two (700 MW + 1,400 MW) of the three planned offshore wind farms. Thus, 60% of the new Princess Elisabeth Zone is already being implemented.