Consumers to underwrite anticipatory investment in offshore wind links

Ofgem is moving ahead with plans for consumers to underwrite anticipatory investment in infrastructure to connect offshore wind farms to the power grid as part of the Early Opportunities workstream of the Offshore Transmission Network Review.

The decision concerns instances in which the initial user spends more than they otherwise would to enable the infrastructure to be shared with anticipated later users.

The regulator said although there are already arrangements in place to facilitate this sharing of offshore transmission infrastructure between wind farms, the additional costs are currently borne by the initial user until the later user connects. Developers have been reluctant to take on this financial risk for fear of being left at a disadvantage in highly competitive seabed leasing and Contracts for Difference rounds.

Ofgem launched a consultation in April on its minded-to decision share this risk between consumers and the later user of the infrastructure, with the additional costs being underwritten by consumers until the later user connects. At this point, the additional costs would be paid for by the later user through Transmission Network Use of System (TNUoS) charges.

The additional costs would also be underwritten by consumers if the later user failed to connect or reduced the capacity of their project. To minimise this liability, Ofgem proposed to extend the user commitment arrangements in the Connection and Use of System Code to cover new offshore transmission assets that are shared by more than one user.

The regulator additionally proposed to introduce an early-stage assessment process to provide it with early visibility of projects seeking to utilise these arrangements and give developers and investors the assurance they need to make anticipatory investments.

It said these arrangements would not cover “highly anticipating investment” whereby initial users invest in infrastructure to be shared with unknown potential projects.

Following feedback from stakeholders, Ofgem has now decided to proceed with all of the proposals, whilst acknowledging the need for further clarity on how TNUoS charges will work for later users, including how costs will be apportioned between initial and later users.

It said these issues will be resolved through the code modification process and instructed National Grid Electricity System Operator (ESO) to the raise the necessary code modifications to implement its decisions.

Ofgem said it expects these code modifications to be raised within the next few months, with the modification process taking 12 months. Depending on their complexity, the regulator said it expects implementation to take another 12 months.

It said it plans to publish draft guidance on the early-stage assessment process in the first quarter of 2023.