Ofgem introduces new framework for onshore transmission upgrades

Ofgem has decided to introduce a new regulatory framework to accelerate the delivery of strategic onshore transmission network projects considered necessary to achieve the government’s target of deploying 50GW of offshore wind generation by 2030.

The Accelerated Strategic Transmission Investment (ASTI) framework will initially cover 26 projects with a collective value of around £20 billion.

These projects would previously have been covered by the Large Onshore Transmission Investment (LOTI) framework, which Ofgem said will continue to facilitate critical investment in the onshore transmission network. However, the regulator said the new ASTI framework will streamline the regulatory approval and funding process by reducing the number of assessment stages and allowing transmission owners earlier access to funding.

Ofgem has also decided to exempt projects that are considered deliverable by 2030 from competition, meaning all those currently listed as ASTI projects will be delivered by the incumbent transmission owners (TOs)– National Grid, SSE and Scottish Power.

The regulator said this exemption will allow the programmatic delivery of projects that is necessary to achieve the government’s 2030 wind target. To ensure this decision is not detrimental to consumers, Ofgem said it has also introduced strong incentives that reward or penalise companies for early or late delivery respectively.

Ofgem said its latest analysis suggests that if all ASTI projects are completed by their optimal delivery dates, consumers will see a net benefit of up £2.1 billion in terms of reduced constraint costs and carbon savings.

Alongside its joint Offshore Transmission Network Review with the government and National Grid Electricity System Operator’s Holistic Network Design, Ofgem said the ASTI framework should be seen as “part of a departure from traditional incremental network build towards a more co-ordinated, top-down network planning approach.”

Reaction

Ross Easton, director of external affairs, Energy Networks Association

“The network reinforcements announced today are another positive step in the transformation underway in the UK’s energy system. Projects like these are unlocking billions of pounds in investment and economic growth right across the country, keeping the UK at the forefront of global offshore wind development.

“All networks will keep working closely with Ofgem, government and the wider industry to make sure that we can unlock strategic investment in an energy system that’s fit for 2050.”

National Grid Electricity Transmission (NGET)

“We welcome the clarity and commitment that this decision gives NGET, and the wider industry, as the next step towards a more affordable, resilient and clean energy system.

“Whilst this investment is fundamental to the successful delivery of the decarbonisation of our electricity system, it will also bring greater security of supply, as well as improved affordability for customers in the long run.”

“However, as Ofgem highlights, urgent reform is still required across a number of areas. The planning system needs streamlining to allow for the delivery of this critical national infrastructure in a timely fashion; the setting of allowances needs to enable a programmatic approach; and communities must see clear long-term economic benefit to hosting infrastructure for the UK to achieve its net zero ambition.

“We will continue to work alongside government and Ofgem to progress these critical projects, as we look towards agreeing a regulatory and financial framework that can enable the delivery of this infrastructure in future years.”

Rob McDonald, managing director, SSEN Transmission

“Accelerating the development and delivery of the strategic electricity transmission infrastructure required to enable the deployment of homegrown and affordable, low carbon power, is arguably the most important enabler to securing the UK’s future energy security and net zero ambitions. This includes unlocking the first phase of the ScotWind leasing round, supporting UK and Scottish government targets.

“As we continue to assess the detail of today’s publication and await Ofgem’s proposed regulatory licence changes, we remain committed to work constructively with Ofgem and other stakeholders to establish a regulatory framework that appropriately balances risk and reward, and ultimately accelerates the delivery of electricity transmission infrastructure required to meet our future energy ambitions.”