Offshore Transmission (OFTO) regime, now fully in place, set to achieve further savings
11 Jun 2014 01:02 PM
- Changes to the regime
clarify legal framework for developers and investors
- 18-month period to
complete commissioning of transmission assets
- It’s already
attracted £1.4 billion of investment, leading to significant savings for
consumers
Yesterday marked a milestone, as
the offshore transmission regime set up by Ofgem and the Department of Energy
and Climate Change (DECC) fully commences. Full commencement means that from
the laws supporting the regime take full effect. Ofgem now regulates and
licenses the transmission of electricity generated in Britain’s
territorial waters at 132kV or above.
The Generator Commissioning
Clause gives greater certainty to wind farm developers that choose to build the
transmission systems themselves. It gives them an 18-month period to legally
test transmission systems before transferring them to an offshore transmission
owner. This will reassure offshore transmission owners and investors that the
transmission assets they are buying have been fully tested.
The changes will enable Ofgem to
attract further investment and achieve significant savings for consumers.
£1.4bn of investment has already been attracted from a variety of new
sources and £1.5bn is currently in the tender process. Developers
recovering the capital invested through the tender process will be able to
reinvest in future projects, promoting economic growth.
Ofgem is currently consulting on
an independent report that estimates that through competition and appropriate
allocation of risks, the regime has already saved consumers between £200m
and £400m. As future projects will be further from shore and more
complex, Ofgem’s competitive tendering approach could achieve further
savings.
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Notes to
editors:
- The offshore regulatory regime,
developed by DECC and Ofgem, was launched in 2009 and uses competitive
tendering for licensing offshore electricity transmission. The regime is
flexible, allowing Ofgem to run tenders for projects where:
- Offshore Transmission Owners
(OFTOs) design, build, operate and maintain the transmission assets;
or
- Generators build the
transmission assets and then transfer them to OFTOs at construction
completion.
- For more information on offshore
transmission see the offshore section of our website. For more information on
the new features designed to keep the cost of transmission investment as low as
possible for consumers, please see our recent
consultation.
- For more information on the
pipeline of offshore wind power, see the DECCRenewable Energy Roadmap.
- Ofgem are currently consulting
on an independent evaluation of the benefits of Offshore Transmission Tender
Round 1 (TR1), by CEPA and BDO. CEPA and BDO’s report estimates that
Ofgem’s competitive tendering of offshore transmission assets has saved
consumers between £200m and £400m to date. CEPA/BDO also
estimate that if the same cost benefit analysis methodology used to evaluate
the TR1 projects was applied to projects in Tender Round 2 (TR2), the cost
savings could be considerable. For example, the cost savings (as a percentage
of asset value) for London Array (the first project in TR2 to have reached
financial close) could be 20-30% higher than for the TR1 projects. The consultation is open until the
1st August.
-
The Full Commencement Orders for
the regime can be found here:
6. The Generator Commissioning
Clause was consulted on widely by Ofgem before its implementation. It provides
developers that build their own transmission systems with an 18 month period in
which they can legally build and test them for exporting electricity. The
Clause applies within the ‘commissioning period’ which extends from
tender qualification to 18 months after a Completion Notice is issued for the
transmission system. Further information is available in the consultation
document and in the document setting our Decision on implementation of the
Generator Commissioning Clause in the Energy Act 2013.