Offshore transmission assets transport electricity from offshore generation sites (such as windfarms) back to the GB grid. The timely and efficient installation of this infrastructure is a key enabler of the UK’s 2020 renewable energy target, as well as its carbon budgets on the pathway to 2050. The GB regulatory regime for the construction and operation of offshore transmission assets is designed to provide flexibility for generators in terms of who constructs the assets as well as cost-effectiveness to consumers and generators from the competitive drivers.
Generators have a choice of constructing the transmission assets themselves or to opt for an Offshore Transmission Owner (OFTO) to do so. If they construct the assets themselves, then the generator must transfer the assets to an OFTO post-construction and pre-operation. OFTO’s are selected on a competitive basis through a tender process run by Ofgem, the GB energy regulator. Initial analysis by Ofgem estimates that the offshore transmission regime’s competitive drivers will deliver significant cost savings to generators and consumers alike. There is significant interest in the OFTO market from new entrants to the sector, with almost £4 billion of bids for the first £1.1 billion of assets tendered by Ofgem.
The items below relate to recent offshore transmission developments. Further details on offshore transmission regime and OFTO tender rounds can be found on the Ofgem: Offshore transmission web pages.
Offshore Transmission Coordination Project Conclusions – March 2012
DECC and Ofgem have published a report on the conclusions of the joint offshore transmission coordination project.
The project was set up in 2011 to consider whether further measures are necessary to help ensure that onshore and offshore transmission networks develop in a strategic and coordinated manner.. Government and Ofgem recognise the potential benefits that the coordinated development of offshore electricity transmission infrastructure can offer, including lower overall capital costs, potentially reduced planning-related delays and reduced pressure on onshore infrastructure. This was a major driver in the prior decision to extend the role of National Grid’s onshore System Operator responsibilities offshore, including to develop a coordinated system of electricity transmission, and to create a licence obligation requiring the System Operator to develop an Offshore Development Information Statement (ODIS). The System Operator has been offered some Round 3 Zone developers connections which envisage more coordinated configurations.
Modelling undertaken for the project using four different generation scenarios, found that coordinated configurations in respect of certain Crown Estate Round 3 Zones have the potential to deliver savings of around 8-15%, or £0.5-3.5billion, when compared to purely radial configurations. The report confirms that an incremental, evolutionary approach to offshore network development best serves the needs of consumers and generators given the future uncertainties involved, and that for certain Zones a radial configuration is likely to remain the best option. However, for those Zones where a coordinated configuration could be most efficient and deliverable, there may need to be anticipatory investment made at key decisions points in the build-out of the Zone to keep options for coordination open.
The project identified six areas of potential barrier to the coordinated development of the offshore and onshore networks, where further measures are required to provide the right incentives. The potential barriers and proposed ways to address them are set out in the report. They cover the following areas:
- Anticipatory investment
- Designing an efficient network
- Consenting
- Risk-reward profile for coordinated investments
- Regulatory boundaries
- Technology and supply chain
In parallel to publication of the joint conclusions report, Ofgem has published a consultation document on decisions around implementation of certain proposed new measures, in particular anticipatory development and designing an efficient network.
Offshore transmission coordination – insights from other countries and sectors
To support the joint DECC and Ofgem Offshore Transmission Coordination Project (see above), DECC commissioned consultants SKM and CEPA to conduct an analysis of regulatory regimes for offshore electricity transmission in other countries with significant amounts of planned or existing offshore wind generation, as well as for other relevant infrastructure sectors, to uncover insights and enable evidence-based international comparisons. In all the countries studied (Great Britain, Germany, Denmark, the Netherlands, Belgium, France, Ireland, Sweden, China and the USA), all existing offshore wind farm connections have been delivered as radial configurations so far, though some integrated configurations are now planned. Irrespective of the type of regulatory regime, key requirements for integrated configurations to be efficient are the geographical proximity of wind farms and their development timelines.
The analysis is delivered in three separate reports:
update on further commencement – June 2011
Ofgem is running tender processes to grant Offshore Transmission Owner (OFTO) licences for transitional tender round 1 and 2 offshore generation projects. Government has amended key definitions in the Electricity Act 1989 to extend the offshore transmission regulatory regime to all projects conveying electricity from GB offshore waters at or above 132kV, including projects in the Renewable Energy Zone (REZ). The amended definitions are partially commenced and currently apply to projects conveying electricity from offshore at or above 132kV from the point of asset transfer to an OFTO.
Government intends to commence the regulatory regime in due course to apply it to all OFTO and generator built assets at or above 132 kV and extend the territorial extent of the regime into the REZ. As a result, the class exemption order that applies to offshore distribution will no longer apply to an offshore line that conveys electricity generated offshore at 132 kV.
In deciding the appropriate timing for further commencement of the regulatory regime, government will take into account factors including the need for a smooth transition from the current arrangements for projects that are part of the transitional tender rounds, and the implementation of the Third Energy Package.
Based on these considerations, Government does not intend to further commence the offshore transmission regulatory regime before summer 2012. We will review, with Ofgem, the position on timing of further commencement at the end of 2011.
Government response to consultations on offshore electricity transmission – December 2010
On 15 December 2010, the Government published its response to the August 2010 and November 2010 consultations on refinements to the enduring regime for offshore electricity transmission.
The response sets out changes made by the Secretary of State to the Connection and Use of System Code (CUSC) and the Grid Code, in order to ensure the availability of a generator build option on an enduring basis. We consider that changes will also be required to the System Operator – Transmission Owner Code (STC) to fully implement our policy decisions, and we set out how we expect those changes to be progressed.
The document also outlines the approach to further refinements to the enduring regime, including to the enduring Offshore Transmission Owner (OFTO) tender process.
In addition, letters have been sent to the owner of the CUSC and the Grid Code informing them of the changes made to those codes and instructing them to publish the changes by 31 December 2010, from which date they will take effect.
The Government response, annexes of amended code text, final impact assessment and the letters to code owners are all available on the November 2010 consultation page.
Offshore Electricity Transmission - Implementing further refinements to the enduring regime November 2010
On 8 November 2010, DECC and Ofgem E-Serve published a joint consultation document, ‘Offshore Electricity Transmission: Implementing further refinements to the enduring regime’.
This document follows a joint decision by DECC and Ofgem E-Serve to provide additional flexibility under the enduring offshore transmission regime. It consults on proposed amendments to the Connection and Use of System Code (CUSC) and the Grid Code that we consider necessary to implement our policy decisions to provide a generator build option as part of the enduring regime for offshore electricity transmission and to provide additional clarity on the OFTO build options. We also consider that changes to the System Operator – Transmission Owner Code (STC) will be required to implement our policy decisions and we intend to publish the proposed STC changes later in the year.
The consultation document and annexes are available in our consultation section.
Offshore Transmission Regime: Initial decision on generator build option
On 21 October 2010, DECC and Ofgem E-Serve published a joint open letter (below), ‘Providing additional flexibility in the enduring regulatory regime for offshore electricity transmission: Initial joint decision statement’. This letter announces our intention to implement the changes necessary to deliver a generator build option in the enduring regime. We will shortly consult on the detailed changes to the industry codes necessary to deliver the generator build approach. This letter also outlines our intention to further consider how best to facilitate co-ordinated development of the offshore transmission system through the offshore transmission regime.
Offshore electricity transmission regime - further consultation August 2010
On 26 August 2010, DECC and Ofgem E-Serve published a consultation on the enduring offshore transmission regime, ‘Offshore electricity transmission: further consultation on the enduring regulatory regime’.
Building on Ofgem’s December 2009 consultation, Offshore Electricity Transmission: Consultation on the Enduring Regime, it provides updated proposals on OFTO build options, presents an additional ‘generator build’ option and outlines the implementation challenges identified in delivering this further option. In addition the document considers how the competitive regime can facilitate the development of a co-ordinated offshore network and seeks views on whether further action is required to support co-ordination.
The consultation document and Impact Assessment are available in our Consultations section.
Offshore Grid Connections
On 27 July 2010 DECC and Ofgem E-Serve published a joint open letter, ‘Providing additional flexibility in the enduring regulatory regime for offshore electricity transmission – Ofgem E-Serve/DECC open letter’. This letter outlines our intention to consult further on the enduring regime for offshore electricity transmission. We propose to consult on providing the option of enabling generator developers to design and construct the transmission infrastructure in addition to the existing ‘OFTO’ build approach. The consultation will also seek views on how best to ensure that the enduring regime delivers a coordinated and strategic onshore and offshore network.
The letter, below, also provides details on the commencement of the new regime for transitional projects; new tender regulations; and the next steps.
Offshore grid development - research published on Joint Projects and interconnection
As a useful contribution to the debate on the development of renewable ‘Joint Projects’ with other European countries under the Renewable Energy Directive, DECC appointed Sinclair Knight Merz (SKM), in association with Deloitte, to undertake a high level review of the costs and benefits from a UK perspective of different potential Joint Projects and different means of exporting the resulting electricity back to the UK. In particular, the analysis looked at the question of whether offshore windfarms offer a cost-effective option for interconnection. Four potential areas around the UK were examined for potential Joint Project development, namely Norway (North Sea), Ireland (Irish Sea), Continental Europe (English Channel area) and Iceland.
The report, below, identifies clear potential benefits to the UK from Joint Project development and interconnection. It generally finds that in the short to medium term for the potential projects considered, point to point interconnection that does not incorporate offshore windfarms provides the most cost-effective means of achieving those benefits.