• Competitive tender for transmission links forecast to deliver £350 million of savings for consumers
• 2 GW of offshore wind to be connected
• Almost £4 billion of investment appetite to own and run nine transmission links worth £1.1 billion
• Preferred and reserve bidders chosen for seven projects, with two to be decided at a later stage
Three preferred bidders (Balfour Beatty Capital Ltd, Macquarie Capital Group Ltd and Transmission Capital Partners) selected to own and operate the first £700 million worth of transmission links to seven offshore wind farms have been announced today following a tender process run by energy regulator Ofgem.
This is part of a joint Department of Energy and Climate Change (DECC) and Ofgem scheme to encourage investment in high voltage transmission links for the potential 50GW of new offshore wind generation.
Strong competition has attracted almost £4 billion of investment appetite for all nine transmission links worth around £1.1 billion. The competitive approach has seen five consortia bid for the right to own and operate offshore transmission links in return for a 20-year regulated revenue stream. The current tender round has resulted in overall forecast savings of £350 million for offshore wind farms and ultimately consumers.
Ofgem’s Chief Executive Alistair Buchanan said: “Attracting almost £4 billion of investment appetite in today’s capital markets, following the financial crisis, shows how an Ofgem-run competitive regime for regulated revenue streams can prove very effective at attracting investment.
“By ensuring companies have to compete for this regulated revenue stream, we have been able to keep costs to consumers and wind farm developers as low as possible, delivering forecast savings of £350 million compared to equivalent onshore transmission costs.”
The successful bidders from this tender round will own and operate links for around 2 gigawatts (2 GW) of renewable electricity for Britain’s first wave of offshore wind farms.
The Secretary of State for Energy and Climate Change, Chris Huhne, said: “Offshore wind has a vital part to play in the delivery of our renewable energy targets. The decision on the preferred bidders for these licences is the first step in ensuring that offshore wind farm connections are operated in a cost effective and secure manner.”
These decisions follow the setting up of the Offshore Transmission Regime by DECC and Ofgem’s delivery arm, Ofgem E-Serve, to deliver the high voltage links to offshore wind farms as cost effectively as possible.
Preferred and reserve bidders have been selected for seven of the nine transmission projects in this tender round. The remaining two projects are Ormonde and Greater Gabbard. Three bidders have been selected to submit Best and Final Offers (BaFO) for the Ormonde transmission project. The Invitation to Tender (ITT) stage is to be re-run for the Greater Gabbard project, which will enable a simplified transfer of the phased transmission assets to the offshore transmission licensee in accordance with the offshore regime commencement orders recently signed by the Secretary of State. The tender processes for these two projects will ensure best value outcomes for developers and consumers and the projects will not suffer any delays in their timetables for transmission of energy as a result of the competition.
Ofgem will commence a second transitional round of tenders later this year for assets for around 2GW of capacity, with a potential asset value of around £1.8 billion.
Following the success of the competitive tender process, DECC and Ofgem will shortly be consulting on Ofgem running tenders, under the enduring regime, that allow developers the choice of seeking offshore transmission licensees to either take on responsibility for:
• the ongoing finance, operation and maintenance for transmission links designed and built by the generator developer and transferred to the operator upon completion of construction; or
• the design, construction, finance and on-going operation and maintenance of the transmission links.
In total high voltage cable links worth over £20 billion would be needed to connect a potential of around 50 GW of offshore wind over the coming years.
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Source: ofgem, August 05 , 2010;