Ofgem revises position on shared offshore transmission links

Ofgem has revised its minded-to position on the delivery of shared offshore transmission infrastructure needed to achieve the government’s 2030 offshore wind target.

The regulator said it now plans to allow the appointment of offshore transmission owners to build non-radial connections that are shared between multiple generators.

As part of the Pathway to 2030 workstream of the Offshore Transmission Network Review, Ofgem announced its initial minded-to position in May that non-radial offshore transmission assets included in the workstream should be delivered under a “very late competition – generator build” model.

Under this model, shared offshore transmission infrastructure will be built by generators themselves before an offshore transmission owner (OFTO) is appointed to operate the assets.

However, based on feedback from stakeholders, Ofgem has also decided to allow generators to opt for a “late competition – OFTO build” – delivery model, whereby an offshore transmission owner will be appointed to both build and operate shared assets.

The regulator noted arguments from stakeholders that this option could ease coordination pressures between developers, which would be less reliant on each other and would instead be reliant on a third party: “There would be less of a need to draw up joint ventures or to set up governance, decision making and accountability structures between developers.”

Stakeholders said this option would also ease financial pressure on developers by freeing up their cashflow earlier in the process and relieve them from facing cost disallowance risks for another developer’s assets. Furthermore, there would less of a need to share sensitive timeline, engineering and technology information with competitors.

Ofgem said this model could be particularly helpful in instances where the development of non-radial offshore transmission assets has no natural leading party.

The regulator said its earlier concerns that the development of this model could risk delays have also been alleviated after it reduced the number of Pathway to 2030 assets classified as non-radial to 3 out of 21 following the publication of National Grid Electricity System Operator’s Holistic Network Design.

Ofgem has additionally made a minded-to decision to extend the principles for anticipatory investment developed as part of the Early Opportunities workstream of the Offshore Transmission Network Review to the Pathway to 2030 workstream.

Under these principles, anticipatory investment by the initial users of infrastructure to enable it to be shared with anticipated later users will be underwritten by consumers until the later user either begins paying transmission charges or fails to connect.

Ofgem said this will help to avoid any delay and delivery risks associated with commercial arrangements between multiple parties or with the need to run a new tender process, and will be of particular use in situations where projects are running on different timescales.

Developers that opt to utilise this policy will be able recover any anticipatory investment they make via a transfer sum paid by the offshore transmission owner following the cost assessment process.

Furthermore, Ofgem has amended its minded-to decision in May to limit the scope of the Pathway to 2030 workstream to the Crown Estate’s fourth offshore wind leasing round, Crown Estate Scotland’s ScotWind leasing round and one project from a previous leasing round.

The regulator has now said the delivery models under this workstream should also be extended to the Crown Estate’s Celtic Sea leasing round for floating wind that is intended to bring forward 4GW of new generation by 2035.

Although only 1GW of this capacity is expected to connect by 2030, Ofgem said it is essential that the Crown Estate is able to provide certainty on the delivery models for offshore transmission infrastructure to bidders in the tender, which is due to launch in mid-2023.

It also noted that the delivery of some Celtic Sea projects will happen at the same time as projects already included in the workstream.

The deadline for responses to its new and revised decisions is 26 January 2023.

Pilots for MPI scheme unveiled

Alongside the update on the Pathway to 2030 workstream, Ofgem has also announced the selection of the pilot projects for its multi-purpose interconnector (MPI) scheme.

The regulator said it received four applications by the deadline of 31 October.

• The Nautilus interconnector with Belgium being developed by National Grid Ventures
• The Eurolink interconnector with the Netherlands being developed by National Grid Ventures
• Two interconnectors with Norway – one being developed by National Grid Ventures and the other by the NorthConnect Consortium

Ofgem said all four projects met its initial eligibility criteria but only two – the Nautilus and Eurolink interconnectors – demonstrated sufficient deliverability and maturity to progress further in the pilot process at the moment.

The regulator said it is pausing its decision on whether to take forward the two interconnectors with Norway as pilot projects until spring 2023 as there are “ongoing considerations within Norway which will determine whether it will be possible to develop an MPI to Norway in the timeframe envisaged”.

Ofgem said it is pausing the decision, rather than ruling out these projects, as it wants to extend every opportunity for the MPI pilot scheme to contribute towards the government’s dual ambitions of delivering at least 18GW of interconnection and 50GW of offshore wind by 2030.

It said it intends to consult on the development of an MPI regulatory regime in second quarter of 2023 and, following on from this, consult on its initial project assessment decisions in the second half of the year.