United Kingdom

United Kingdom

Government goes for competition -- Offshore transmission solution

The British government has chosen a competitive approach to operating the offshore transmission wires connecting wind farms out at sea to the mainland network following a four month consultation with the wind industry and other stakeholders. The Department of Trade and Industry (DTI) argues that allowing a wider number of companies to compete to build, own and maintain the links will deliver cheaper connections more quickly. Competition will also encourage innovation and enable more entrants into the market, it says.

The decision in Britain is in stark contrast to the approach taken by the German and Danish governments, which are both requiring the existing network operators to provide transmission wires for offshore wind power stations. The decision in Germany was met by a storm of protest from electricity consumers, who feared dramatic increases in the size of their electricity bills (Windpower Monthly, December 2006).

In Britain, the new licensing regime for offshore transmission, similar to the approach taken in much of the United States for getting new wires built on land, will mostly cover the second UK round of larger offshore projects built further from the coast. Fifteen "Round 2" projects totalling up to 7 GW are planned in three strategic offshore development areas around Britain, in the north Irish Sea off north-west England and Wales, the Greater Wash off eastern England, and in the Outer Thames Estuary south of the Wash. Three projects with a combined capacity of 1800 MW -- all in the Thames Estuary -- have been granted consent, while a further five projects have applied for consent to be built in these areas and are awaiting a decision.

Two options

The government considered two options for licensing offshore transmission: "non-exclusive," where existing monopoly owners of the onshore system would compete against newcomers; and the "exclusive" approach, similar to the onshore grid, with tendering for a number of different geographical regions in which a single transmission owner would provide all grid connections.

In responses to the consultation, wind project developers were evenly split in their support between the two options. But broadly, developers of the more advanced round two offshore projects and potential offshore transmission owners (TOs) favoured the competitive approach, while the later round two developers together with equipment manufacturers preferred the exclusive option.

Developers who called for competition in the offshore regime believe it is the more transparent option. They argued that it could result in lower transmission charges because, under a competitive tender, the real costs of constructing the connections will be known from the outset.

Adopt a wire

Even before the consultation began, energy regulator Ofgem, which will administer the offshore TO licenses, was already in favour of the competitive option. David Gray from Ofgem says: "Introducing competition in transmission will benefit consumers and offshore renewable generators by putting downward pressure on prices and delivery times. We are keen to encourage effective competition and would therefore be interested in hearing from serious parties interested in developing these links."

Meantime, before the new offshore transmission licences are awarded, a number of developers with well advanced projects will have built or begun to build offshore connections for them. These will pass to the new offshore TOs when the new regime begins -- a process known as "adoption." The DTI says that it will allow enough time before introducing the new arrangements to allow adoption to take place. Moreover, if no TOs are willing to take on any of the developers' connections, the generators themselves will be allowed to continue to own their transmission assets.

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