Ofgem invites bids for £7bn of offshore wind connections

Ofgem has put out a call to prospective investors to bid for £7 billion of offshore transmission assets due to be auctioned off over the next two years.

Under the Offshore Transmission Owners (OFTO) regime, investors bid to own and operate the transmission connections built by the developers of offshore wind farms. Subject to meeting availability targets, they receive guaranteed returns for 25 years.

Ofgem said the next two years will see a “surge” in OFTO assets coming to market as part of the government’s efforts to deploy 50GW of offshore wind generation by 2030. Ten such connections are expected to go under the hammer in two bidding rounds in 2024 and 2025.

The regulator said the OFTO regime ensures compliance with competition laws, which stipulate that offshore wind farm developers may not own the associated transmission links once a project is operational. It said the design means developers can build the connections according to their own desired specifications and timeframes, while also enabling them to recycle the proceeds from the sales back into further developments.

In the 11 years since its introduction, Ofgem said the OFTO regime has secured investments in 24 connections assets, with several more currently going through the process.

The next bidding round is due to begin in early 2024. Ofgem will assess the bids and grant licences to the winners in a process that usually takes around two years.

Akshay Kaul, interim director for Ofgem’s infrastructure and security of supply group, said: “OFTOs are an important part of a multi-billion-pound investment Ofgem is facilitating through its regulation of energy networks. They deliver on energy security and affordability for Britain’s consumers by reducing our reliance on expensive imported fossil fuels. They offer investors attractive index-linked steady returns for 25 years.

“Britain already has the highest offshore wind deployment in Europe, and the second highest in the world. With the government’s target of 50GW of offshore wind generation by 2030 there is still huge potential for investors to get in early and be part of an industry that’s set for huge worldwide growth.”

Kaul said investors should “rest assured” that the necessary onshore infrastructure will be in place, highlighting its work on the new Accelerated Strategic Transmission Investment framework, National Grid’s Holistic Network Design and connection reforms.

In April, Ofgem confirmed the delivery models for shared offshore transmission infrastructure needed to meet the government’s 2030 offshore wind target.