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LONDON, England, April 5, 2006 (Refocus
Weekly)
Offshore windfarms will be governed by the same
rules as onshore facilities, for connection to the electrical grid.
“This is an important step for Britain's offshore wind energy
industry as the measures I am announcing will increase its viability
by spreading grid connection costs over a number of years,” says
energy minister Malcolm Wicks. “My decision also gives developers
vital certainty and ensures consistency with the onshore
arrangements.”
The decision follows a joint consultation with the energy regulator,
Ofgem, as part of government efforts to increase offshore wind
capacity.
“We are aiming for 10% of our electricity to come from renewable
sources by 2010 and windfarm projects such as those planned for the
Greater Wash, off the North West coast and in the Thames Estuary,
can potentially make a significant contribution to that target,” he
adds. “These projects alone have the potential to produce between
5.4 and 7.2 GW, which is enough electricity for more than one in six
UK households. This regulatory framework can also benefit the future
development of wave and tidal marine technologies.”
The majority of costs of building offshore connections ultimately
will be paid by windfarm developers, but they will be staggered over
several years and funded by a regulated rate of return which likely
will be lower than the market rate. The actual rate has yet to be
determined, and Ofgem will ensure that connection investments are
economic and efficient, similar to the system it applies to
connection of onshore generation assets.
Extending the regulated price control approach to offshore
transmission has a number of advantages for offshore windfarms and
the efficient operation of the transmission system as a whole,
including the fact that it will ensure consistency with the
regulatory arrangements onshore, explains Wicks. It will provide a
financial benefit to offshore developers by spreading the costs to
connect to the onshore grid through annual transmission charges
recovered over several years, and means that the responsibility for
developing the offshore transmission network will be shared by
system operator and transmission asset owners.
The approach will help to deliver the government's targets for
renewable energy, he adds, and the regulated price control approach
will have additional environmental benefits by ensuring a co-ordinated
approach to development of the offshore network and reducing
unnecessary duplication of transmission assets. The final option was
favoured by most respondents to a consultation exercise, including
all offshore wind developers that responded, he notes.
The consultation document from DTI and Ofgem, ‘Regulation of
Offshore Electricity Transmission,’ was published last July and set
two main options for regulating the charges levied on transmitting
electricity to the mainland, either from windfarms or other sources
such as wave and tidal power. The consultation ended in October and
prompted 31 responses from a range of stakeholders.
From those responses, 16 favoured price controls, four favoured
price control with capping and another four favoured the licensed
merchant approach. One was in favour of a hybrid approach and six
had no preference.
Ofgem will issue a scoping document soon, to explain how it intends
to proceed on the allocation of offshore transmission licences, the
form of price controls for offshore transmission licensees, and the
program of work to modify licence conditions and industry codes.
That final program of work will take at least 18 months, before
there be changes to the specific conditions of offshore licences.
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