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Offshore Transmission: Industry Briefing 7 October 2011
14 June 2012
Connec&ng Offshore Wind to the Grid – a New Regulatory Model
4th Annual Smart Grids & Cleanpower 2012 Conference 14 June 2012 Cambridge www.cir-strategy.com/events
Steve Beel, Head of Offshore Regime Implementation, Ofgem
Office of the Gas and Electricity Markets (UK) Aims: • To protect consumers and secure Britain’s energy
supplies by promo;ng compe;;ve gas and electricity markets
• To regulate gas and electricity markets to ensure adequate investment in the networks
• To contribute to the drive to curb climate change and other work aimed at sustainable development
Ofgem E-‐Serve
• Responsible for Ofgem’s support and delivery func;ons
• Focuses on administering environmental programmes and the delivery of sustainability projects.
• Offshore Transmission is part of E-‐Serve
What is Ofgem?
www.ofgem.gov.uk/offshore
UK transmission regime
• Onshore Transmission: – RIIO – 3 Transmission Owners – 8-‐year price controls – Greater innova;on – Op;on for more third party delivery
• Offshore Transmission – Compe;;ve ownership of
transmission assets offshore – Coordina;on regime
www.ofgem.gov.uk/offshore
Offshore Transmission: Objectives
• Facilitate new investment in offshore wind energy
• Ensure electricity links delivering power to shore built on ;me and provide value for money
• Provide a new regime for compe;;ve tendering to:
– Lower the cost of building and opera;ng assets
– Enable new players to bring innova;ve technical, opera;onal and financial solu;ons to the connec;on of offshore wind farms
– Provide a lighter touch regulatory approach (since there will be no need for regular price control reviews for OFTOs)
www.ofgem.gov.uk/offshore
Offshore Transmission Owner (OFTO)
Offshore Substation Platform
Offshore Transmission Owner (OFTO) Licence Awarded via Competition
Onshore TO Generator
Connection to onshore network
Subsea cable 132 kV 33 kV Inter Array Cables
Onshore Substation
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www.ofgem.gov.uk/offshore
Key aspects of OFTO model
• Strong regulatory and poli;cal support • OFTOs selected through compe;;ve tender process run by Ofgem
• 20 year revenue stream • Availability-‐based regime – OFTOs do not have exposure to genera;on output
• Performance incen;ves and penal;es up to 10% of revenue for below target availability
• Transi;onal regime deals only with transmission assets already built by generator
• Enduring regime presents op;on for OFTO Build as well as Generator Build
www.ofgem.gov.uk/offshore
OFTO regime milestones
0
5
10
15
20
25
30
35
Final Consultation
First Transitional Tender Process
(£1.1bn)
2ndTransitional Tender (£1.2bn)
2009 2020 2011 2012
Go-Active
Go-Live
Enduring Regime Tender Process (up to £14bn)
2010
Cumulative UK Offshore
Wind Capacity
(GW)
Enduring regime - allows transmission construction
by Generator or OFTO
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www.ofgem.gov.uk/offshore
Tender round experiences
• Interna;onal interest • Par;cipants thus far include infrastructure funds, niche specialists, transmission operators and strategic players (e.g. Transmission Capital Partners, INPP, Macquarie, Mitsubishi, Balfour Bea]y, Na;onal Grid, Equi;x, Barclays Infrastructure Fund)
• £250m invested thus far in OFTOs – allowing developers to recycle money into future windfarm projects
• Commercial lenders, European Investment Bank, pension funds and capital markets have all par;cipated or shown interest
• An effec;ve means of a]rac;ng new sources of financing and new par;cipants into UK transmission infrastructure
• Plenty of interest in future design and build opportuni;es
www.ofgem.gov.uk/offshore
Xx
International Intra-zonal Inter-zonal Onshore/offshore
Round 1: 1GW Round 2: 7GW Round 3: 32GW Round 1 & 2 extensions: 1.5GW Scottish territorial waters: 4.3GW Northern Irish waters 0.9 GW
The 4 forms of coordination
The Crown Estate Leasing Rounds
Coordination of offshore transmission assets
Straighborward radial (point-‐to-‐point) connec;on will s;ll be the best solu;on in some cases.
www.ofgem.gov.uk/offshore
Low Carbon Network Fund
• Part of the current electricity distribu&on price control arrangements – Established by Ofgem – Up to £500m support to projects
sponsored by distribu;on network operators (DNOs)
– Projects focus on new technology, opera;ng and commercial arrangements
• Objec&ve -‐ security of supply at value for money as Great Britain (GB) moves to a low carbon economy
www.ofgem.gov.uk/offshore
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www.ofgem.gov.uk/offshore