Ofgem grants £308 million transmission assets licence for Lincs wind farm

Press release

Publication date

Industry sector

Offshore Transmission Network
  • Tenth offshore transmission project to reach financial close and licence grant
  • Second project to be granted an OFTO licence in the second tender round
  • Over £1.7 billion of new transmission investment delivered by the regime to date

Ofgem has today granted TC Lincs OFTO Limited a licence to own and operate the transmission link to the Lincs wind farm. Lincs is located eight kilometres off the coast of Skegness and comprises 75 turbines generating 270MW, which is enough to provide clean energy to 200,000 homes.

The Lincs project was tendered under the second tender round of the Offshore Transmission Owner (OFTO) regime, which totals over £1.4 billion of transmission assets. It is the tenth offshore transmission project to reach financial close and the second in this tender round.

Subject to TC Lincs OFTO Limited achieving the required performance standards, the annual payment made to it will be £24 million. It is lower than for any project completed during the first tender round, when considered as a percentage of the value of the transmission system. This represents further evidence of the innovation introduced by Ofgem’s competitive tendering process, which is helping to force down the costs of connecting offshore windfarms to the grid, benefiting consumers.

TC Lincs OFTO Limited, which will own and operate the £308 million transmission link to the Lincs wind farm, is owned by Transmission Capital Partners (TCP), a consortium comprising of Transmission Capital Partners LP and International Public Partnerships. Lincs is the fifth OFTO licence awarded to Transmission Capital Partners.

The offshore regime has now delivered over £1.7 billion of investment, leading to significant savings for consumers.

Notes to editors

  1. 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 being delivered in two parts, transitional and enduring. The transitional regime involved two tender rounds (Tender Round 1 and 2), which opened the way for transmission licencees to own and operate transmission assets for offshore renewable projects that have been or are being constructed by an offshore generator. Tender Round 3 falls under the enduring regime, which enables 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.
     
  2. Lincs offshore wind farm is a joint venture owned by DONG Energy (25%), Centrica (50%), and Siemens Project Ventures (SPV) (25%). It is situated 8 kilometres (5 miles) off the coast of Skegness and comprises 75 3.6MW turbines, giving a capacity of 270MW, which is enough to provide clean power for up to 200,000 households.
     
  3. Lincs is the 5th OFTO Licence awarded to Transmission Capital Partners. They have also been awarded OFTO licences for the following projects: Robin Rigg East and West, Barrow, Gunfleet Sands 1 and 2 and Ormonde.
     
  4. The annual revenue paid to TC Lincs OFTO Limited will be lower than that for projects in the first tender round, when considered as a proportion of the capital cost of the transmission asset. The annual revenue is paid to the OFTO to cover the cost of financing and operating the transmission system. The OFTO’s revenue is subject to it achieving the required performance standards.
     
  5. A recent independent report by consultants CEPA and BDO estimates that through competition and appropriate allocation of risks, the regime has already saved consumers between £200 million and £400 million. CEPA and 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. 
     
  6. For more information on offshore transmission see the offshore section of our website.

 

About Ofgem

Ofgem is the Office of the Gas and Electricity Markets, which supports the Gas and Electricity Markets Authority, the regulator of the gas and electricity industries in Great Britain. The Authority's functions are set out mainly in the Gas Act 1986, the Electricity Act 1989, the Competition Act 1998 and the Utilities Act 2000. In this note, the functions of the Authority under all the relevant Acts are, for simplicity, described as the functions of Ofgem.

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