By Andrew Williams, UK correspondent

Last year, as part of the UK’s Round 3 development of offshore wind resources, the UK government introduced the Offshore Transmission Network Owners (OFTO) regime as a new regulatory regime for licensing offshore electricity transmission.

The regime employs a competitive tendering process to ensure that cable connections are delivered in a timely and cost efficient manner.

The current round of tenders, known as the Transitional Regime, is managed by the electricity and gas market regulator Ofgem, and represents the first phase of a massive £15 billion initiative to ensure links to offshore wind farms are constructed on time and in a cost effective way for both consumers and generators. 

Offshore wind is moving to a multi-contract approach, which, when combined with the introduction of offshore transmission operators (OFTOs), will require more interfaces between a greater number of companies that need to be managed during the construction process.

In the UK, each wind farm currently lays its own transmission cable and, when required to co-ordinate activities with nearby farms, operators have so far managed the process smoothly.

“We haven’t seen any evidence of problems caused by poor co-ordination between adjacent wind farms,” says Sean Kelly, Director at Transmission Capital.

However, as the UK moves towards large-scale grid-connection, co-ordination between sites is likely to become ever more important.

“This management must be performed carefully to ensure projects are safe and successful,” stresses Peter Madigan, Head of Offshore Renewables at RenewableUK.

Progress on the OFTO bidding process

There is little doubt that the initial round of the OFTO process was undertaken on tight timescales, which triggered concerns over a perceived lack of adequate communication from Ofgem. 

However, there are signs that the limited schedule helped to focus attention and may have brought unexpected financial benefits.

“The process did work and the tight timescales helped to keep the bidding costs down,” says Kelly.

Moreover, although the delay in announcing preferred bidders has been unfortunate, for some it is understandable given the change in government.

“OFTOs are complex and critical projects, and with this in mind, we can have no complaints about the length of the procurement process,” says Gavin Merchant, bid director at Equitix.

Room for improvement

For Christophe Druet, Senior Project Manager in Transmission at Elia Group, a key improvement for the next round of the OFTO process would be to involve more parties and increase clarity regarding the regulatory and financial framework.

“Today, I have the feeling one starts to mix regulated assets with merchant ones,” says Druet.  

“It's inefficient [since] it will probably increase the profits of merchant lines and hence the tariffs related to regulated lines.  

“Ultimately the consumer will pay twice for it... if not more,” he warns.

For others, it is vital that more flexibility should be introduced, which should include an allowance for generators to build their own grid-connection and sell it onto an OFTO when the asset is commissioned.

“At present, this developer-build option is only permitted in the transitional stage,” says Madigan.

“We would suggest that the developers be allowed to engage with bidders to a greater extent, earlier in the bidding process,” adds Merchant.

Either way, lessons learned must be assimilated to pave the way for the larger number of tenders expected in future. 

For Kelly though, the next round should focus on fine-tuning rather than radical changes.

“I think the last round showed that bidders are able to respond remarkably quickly and flexibly, but of course improvements can always be made, and we think Ofgem is already aware of many of these,” he says.

What should the offshore grid look like?

Although innovation and technology may play a role in shaping the grid in different ways, one view is that the best option is to allow projects the flexibility to find the optimal solution. 

This could be achieved through regulator frameworks that remove barriers to both single, point-to-point connections, as well as coordinated and interconnected connections.

“The strategic planning of onshore capacity can also make way for a new offshore grid,” says Madigan. 

“Interconnection with other countries is also of strategic benefit to the UK, as it will allow trade of generation across Europe,” he says.

The pan-European implications of the offshore grid are also important to Druet, who claims that it will be difficult to reach the European Commission’s 20/20/20 targets if no decisive action is taken now.

“The longer we wait, the higher the price of the energy, the more difficult it will be to raise money to build such a gigantic project,” he says.

Another point is that understanding of what offshore grids should look like hasn’t been helped by companies producing maps without prior technical or economic analysis, which too often show technology that doesn’t exist or designs that make no economic sense. 

Moreover, a Transmission Capital study of the Firth of Forth revealed that using multiple smaller cables to shore was better for cost and flexibility than more advanced-looking offshore grid designs.  

“To the non-expert it may seem intuitive that an offshore grid with a few big cables is better than having lots of little cables to shore, but this isn’t necessarily true,” adds Madigan.

While the first phase of the OFTO bidding process was completed without any significant hiccups, it is now vital that this modest success is replicated for the remainder of the Transitional Regime and beyond. 

The industry is entering a new and critical period, which will require raised levels of cooperation and coordination between a growing number of stakeholders.

In this light, the role of Ofgem should be in delivering clear, concise and timely mechanisms to support the development of an optimal solution amongst the various industry players.

To respond to this article, please write to:

Andrew Williams: TheGreenExpert@btinternet.com

Or write to the editor:

Rikki Stancich: rstancich@gmail.com

Image: Christophe Druet, Elia Group