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Offshore windfarm developers have been given greater control over their grid connections after a new legal regime officially kicked in last week.
The offshore transmission regime jointly set up by Ofgem and the Department of Energy and Climate Change (Decc) has “fully commenced”, meaning Ofgem now regulates and licenses the cables in British territorial waters.
Offshore wind developers may build their own transmission links before handing them over to an offshore transmission operator (Ofto) to own and operate. A new provision allows them take 18 months for live testing before the handover, to give greater certainty.
The regulator estimates the Ofto regime has already attracted £1.4 billion of investment through the transitional regime, with another £1.5 billion worth of projects in the pipeline.
Ofgem is consulting on estimates the first competitive tender process saved customers between £200 million and £400 million compared to alternative approachs.
Consultants from CEPA and BDO, who completed the analysis, said there was potential for deeper cost savings in subsequent tender rounds. The first project in round two, connecting the London Array, suggested cost savings 20 to 30 per cent higher, as a percentage of asset value.
The report may be seen as a riposte to MPs on the Public Accounts Committee, which last year said the Ofto regime was “extremely generous” to investors at the expense of consumers. Following an inquiry, the spending watchdog said the 10 to 11 per cent annual returns were high given the “limited risks”.
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