Ofgem awards licence for grid link to world’s largest wind farm
4 Mar 2021 11:19 AM
Ofgem has awarded a licence for the grid link to the world’s largest offshore wind farm after securing a record £1.2 billion investment.
- Ofgem’s regulatory framework secures £1.2 billion investment in grid link connecting the world’s largest offshore wind farm
- Framework provides revenue certainty to investors while saving consumers hundreds of millions of pounds on their energy bills
- Ofgem is helping to deliver government target of 40GW offshore wind by 2030 at the lowest cost to consumers
Diamond Transmission Partners, a consortium led by Mitsubishi Corporation, the Japanese industrial group, was selected by Ofgem to own and operate the offshore transmission system linking Hornsea One to the British mainland.
The grid link for the 1.2GW wind farm off the coast of Yorkshire can deliver enough electricity to power more than one million homes.
The UK government has set a target of 40GW offshore wind capacity by 2030, almost quadruple the existing capacity, to help reach net zero emissions by 2050. New electricity grid links are needed to deliver this power to homes and businesses in Britain.
Under the regulatory framework, bidders compete to buy these links from the wind farm developer. In return the winning bidder receives a guaranteed level of income which is set by Ofgem for running the link for up to 25 years.
Providing certainty in this way allows bidders to price very keenly, reducing the costs of offshore wind and saving consumers money.
Ofgem has awarded 21 licences through this process, with a total of £5.7 billion being invested in grid links for 7.8GW of offshore wind capacity.
The first 15 licences alone have delivered at least £700 million in savings to consumers.
Ørsted, which built the Hornsea project, has built 12 offshore wind farms in Britain in total.
Rebecca Barnett, deputy director for commercial and assurance at Ofgem, yesterday said:
“Today’s record investment demonstrates the appetite of global investors to support the UK’s transition to net zero emissions.
“Ofgem’s regulatory framework ensures that this investment can be attracted at the lowest possible cost, saving consumers hundreds of millions of pounds on their energy bills.”
Notes to Editors
- Hornsea One wind farm is located 120km off the Yorkshire coast and consists of 174 seven megawatt wind turbines.
- Ofgem has awarded the licence to own and operate the transmission assets for Hornsea One to Diamond Transmission Partners, a consortium comprising Mitsubishi Corporation and Chubu Electric Power Co., Inc., a Japanese utility.
- The developer of the windfarm and offshore transmission system is Ørsted and Global Infrastructure Partners. Ørsted’s and Global Infrastructure Partners’ initial estimated value (which is the forecast for the development and construction) of the transmission assets was £1.396 billion. Following Ofgem’s assessment of the final project costs, the final transfer value Diamond Transmission Partners will pay to Ørsted and Global Infrastructure Partners is £1.175 billion.
- The Offshore Transmission (OFTO) regime was developed by the Department for Business, Energy and Industrial Strategy and Ofgem, and was launched in 2009. For further information on the OFTO regime, see Offshore transmission tenders.
- Qualifying projects are grouped into competitive tender rounds and announced together. Potential bidders are also assessed at a pre-qualification stage, with qualifying bidders able to bid on all of the projects within a tender round. The Hornsea One wind farm’s offshore transmission system forms part of tender round six which started in 2018. The other two transmission systems in round six are to the East Anglia One wind farm (initial tender value £813.6m) and to Beatrice wind farm (£498.5m). Both are at Preferred Bidder stage. Ofgem will assess consumer savings for the most recent tender rounds later this year.
- To bolster the UK’s vibrant offshore wind sector, Ofgem is working with government and stakeholders to enable a more co-ordinated approach to offshore network development required for the rapid growth of offshore wind power. The Government’s offshore transmission network review will explore how the offshore transmission network could be designed and delivered, consistent with the ambition to deliver net zero emissions by 2050.
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