Background
The Government has set an ambitious target for the deployment of renewable energy over the next decade. By 2020, the Government expects that 15 per cent of the UK’s energy needs will be met from renewable sources. This means that around 30 per cent of our electricity may come from renewables. To achieve this substantial deployment of green energy, the Government has established a policy framework to support investment in renewable generation. Within this framework, offshore wind is recognised as being an important source of renewable energy. Government support schemes will encourage further investment in renewable electricity generation. For this power to reach homes and businesses in Great Britain, fit for purpose electricity networks must be developed, particularly offshore. It is estimated that the investment needed to connect those projects that have or are expected to be granted Crown Estate leases under its Round 1, 2 and 3 programmes could be up to £15 billion.
Offshore Transmission Regime
A step change in network investment of this kind calls for a more dynamic approach to the development of transmission networks: an open, competitive approach that is built on encouraging innovation and new sources of technical expertise and finance. This is why the Government, together with Ofgem, has established the competitive offshore transmission regulatory regime. It will underpin the Government’s renewable energy targets by placing the requirements of renewable generators and GB electricity consumers at the forefront.
Competitive Tender Process
Granting licences to own and maintain new offshore transmission assets via a competitive tender process will mean that generators will be partnered with the most efficient and competitive players in the market. This should result in lower costs and higher standards of service for generators and, ultimately, consumers.
Key dates
The new regime was activated on 24 June 2009. On 22 July 2009 Ofgem commenced the first set of transitional tenders to appoint new offshore grid companies (Offshore Transmission Owners – OFTOs).
Transitional tenders are for projects where the transmission assets have been or will be constructed by the offshore developer, then transferred to the OFTO.
Ofgem commenced the second transitional tender round on 17 November 2010.
Subsequent tenders will fall under the enduring regime. This is known as the enduring regime.