DECC and Ofgem have today published a joint open letter outlining their intention to consult further on the enduring regime for offshore electricity transmission. This was issued as part of the Annual Energy Statement (Action 21).
They propose to consult on providing the option of enabling generator developers to design and construct the transmission infrastructure (to be known as the 'Generator' build approach) in addition to the existing 'OFTO' build approach so that developers can choose which approach is best for them. Under the Generator build approach, generators would build the offshore transmission assets, before transferring them to an OFTO appointed through a competitive tender process, similar to the way in which the Transitional Regime has functioned. Providing generators with a choice about the construction role of an OFTO, the letter states, may allow the different preferences of present and future offshore generators to be reflected and solutions which minimise risk and cost to be found.
The consultation will be welcome news for offshore wind developers who have become increasingly concerned that the requirement for an OFTO to develop and construct the transmission assets will cause delay, greater risk and enhanced finance costs. DECC has clearly recognised that if the UK is to have any chance of getting close to meeting its renewable energy targets, offshore wind farms simply must get constructed and become operational. Utilities are increasingly looking to the external debt and equity markets to assist with the financing of these large infrastructure projects. In order to secure external finance it is critical that these projects are de risked as much as possible. It is within DECC's power to assist with this derisking by allowing offshore developers to assume control over the development and construction of the transmission assets thereby allowing them to integrate the transmission strategy with the generating assets.
The consultation will run for a six-week period with the aim of publishing in early August.
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 open letter is available here.
For further information or advice, please contact Michelle Thomas.
Michelle Thomas
Head of Eversheds' clean energy and sustainability
group
Tel: 0845 498 7553
michellethomas@eversheds.com
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