The UK government anticipates the construction of some 30GW of wind capacity sited offshore. Building the transmission network and other infrastructure needed to bring that power to shore and connect it to the national grid will require substantial investment.
This expectation arises from the government target for renewable energy to meet 15 per cent of the UK’s total energy needs by 2020. Achieving this target will require some 30 per cent of our electricity to come from renewable sources.
It is estimated that the investment needed to connect those projects that have or are expected to be granted Crown Estate leases could be up to £15 billion.
The Government and energy regulator Ofgem have established a competitive regulatory regime for offshore transmission.
Under the regime licences to own and maintain offshore transmission assets are granted through a competitive tender process to an Offshore Transmission Owner (OFTO). The regime was activated in July 2009 when Ofgem started the first set of tenders to appoint new offshore grid companies. This first, so-called transitional, round of tenders was for projects where the transmission assets had been or were to be constructed by the developer, and then transferred to the OFTO.
The second transitional tender round begain in November 2010. Thereafter, the regime will move into its enduring phase where tenders will be for OFTOs to design, finance, own and manage the transmission infrastructure.
Established network operators may compete for OFTO licences with financial entities, infrastructure and engineering companies as well as other parties from outside the energy sector - often acting in consortia.