UK: Great Britain's Offshore Electricity Transmission Regulatory Regime

Last Updated: 10 May 2010
Article by Tessa Laws

Despite the fact that we lag sadly behind our European counterparts in terms of renewable energy sources the UK remains confident that the talking will stop and action will take its place. Given that we are an island the UK's claim that it is the "World leader in offshore wind" should not be surprising and it goes without saying that we should have ambitious plans and budget support for the London Array giving us a fighting chance of meeting our renewables targets. It is hoped that we will be in a position to increase generation from offshore wind and other renewable energies by 2020 in order to enable us to meet our targets but, given current Government limbo, we need to see the renewables consensus converted speedily and whoever is in charge needs to be aware that an almost vertical growth path for renewables is required. Wind, along with wave and tidal power, have been seen as a critical part of our move to a low carbon economy. It is hoped that these opportunities will encourage investment and an increase in our green skills bank in the UK. We have been told that offshore wind could create 70,000 new green jobs which would of course bring enormous economic benefit to the UK not to mention a reduction in our carbon usage and a significant investment in our renewable energy industry.

In June last year Lord Hunt, then Minister of State at the Department of Energy and Climate Change, wrote that the offshore transmission regulatory framework was designed to be flexible and deliver the co-ordinated offshore grid that the UK needs, as efficiently and economically as possible. He assured us that the Government would ensure the regime delivers the co-ordinated network that the UK needs and a vision for network development reaching out beyond 20/20.

Alastair Buchanan, CEO of OFGEM, confirmed that the first three Crown Estates rounds required to connect the new offshore renewable generation to the National Electricity Grid would require investment in grid infrastructure of up to Ł15 billion. He confirmed the new regulatory regime for offshore transmission which was developed in partnership by OFGEM and the Government and provided a framework to encourage the new investment needed to deliver the network. This was to create a huge opportunity for new entrants and companies already active in the British market to invest in offshore transmission assets under a long term and low risk regulatory regime.

As we are aware the Renewables Obligation is the (now) Government's main form of support for live scale renewable electricity in the UK. It is hoped that offshore wind will play an important part in meeting our set target of 15% of the UK's energy needs being met by renewable sources. The Crown Estate have kindly agreed to lease offshore generation sites in order to assist the UK in achieving these targets. Nevertheless we don't have much time and the steps that are required to be taken are immense both in terms of capital investment and in terms of mitigating the effects of climate change. As a result OFGEM ran an open competitive tender for the rights to own and maintain new offshore transmission infrastructure and generators it is hoped will be amongst the most and competitive players on the market which we in turn are assured will result in lower costs and higher standards of service ultimately for consumers.

The Labour Government's plans called for up to 25GW of capacity to be made available and the first OFT's (offshore transmission network owners) licences to be issued by June 2010 when it will become "illegal" to transmit electricity offshore at 132 KW and above without a licence. Six companies have already been announced as shortlisted to provide the connections for nine offshore wind farms. They have since been invited to put forward final bids to own the links under 20 year licences for the "transitional" projects.

All this said, more than 100GW of offshore wind projects are already being drafted in Europe with the aim of satisfying around 10% of the EU's electricity demands and equal to approx 100 large coal-fired plants. As such, and given the unreliability of weather, the UK has agreed to join forces with some of its EU counterparts and begin to build a high-voltage direct current network. This renewables super grid will ensure electricity can be supplied regardless of where the wind is blowing or the sun is shining as it will enable offshore Scottish turbines to convert with wave power in Belgium and solar generation in Germany, for example.

We need to ensure that a new Government continues its commitment to this super grid and as speedily as possible implements the primary legislation for a Green Investment Bank as well, of course, as the Renewable Heat Incentive.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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