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10 August 2020
On 15 July 2020 Energy Minister Kwasi Kwarteng announced a review into the existing GB offshore transmission regime (the "Review") to address the barriers the current single radial connection approach presents to the further significant deployment of offshore wind. The Review suggests that greater coordination between industry participants, in particular between electricity networks, offshore wind projects and interconnectors, may be possible from 2025 onwards.
The Review will be led by the Department for Business, Energy & Industrial Strategy ("BEIS") with support from a range of government and industry bodies and an industry expert group, as well as updates and roundtables with external stakeholders.
The current approach to designing and building offshore transmission was developed when offshore wind was an emerging sector in GB. Whilst the existing regime provides for an "OFTO Build" option, the "Generator Build" option for offshore wind transmission infrastructure has been used exclusively. The current regime has resulted in single "point to point" connections being built by offshore wind developers, which are ultimately transferred to an independent offshore transmission owner via the Ofgem regulated process.
The Review acknowledges that, in the context of increasingly ambitious offshore wind targets in particular, this may no longer be the most efficient approach. Ofgem, the industry regulator, had previously indicated its ambition for a more coordinated approach in its Decarbonisation Action Plan published in February 2020, with a specific focus on the cost to the consumer of the current approach.
Issues arising from the current approach include:
The Review launched by the Energy Minister will bring together the key stakeholders to consider all aspects of the existing regime. The terms of reference for the Review set out that:
Offshore wind is expected to play an important role in delivering net-zero emissions by 2050 and as such it is timely that the government have acknowledged that the framework for delivering offshore transmission connections should be reviewed.
The Review will require the government to consider challenges facing the industry. These include:
There is no one size fits all approach for the future of offshore networks. As illustrated above, there are a range of different regulatory arrangements, contractual structures, designs and technologies that could be considered. The scope of the Review indicates that the government is thinking beyond cables directly between offshore wind farms to future developments such as the incorporation of interconnectors linking two or more jurisdictions through to other options such as offshore energy 'islands'. Designing a regime that provides sufficient certainty to offshore wind developers from 2025 onwards, but which also enables future innovations, will be a key challenge for the Review.
An update of the Review will be published by the end of the year with a view to providing clarity for an enduring approach in 2021. Policy recommendations and proposed changes to the existing regime will be delivered through the usual consultation process.
For further information on this topic please contact Munir Hassan, Louise Dalton or Amber Sinclair at CMS Cameron McKenna Nabarro Olswang LLP by telephone (+44 20 7367 3000) or email (email@example.com, firstname.lastname@example.org or email@example.com). The CMS Cameron McKenna Nabarro Olswang LLP website can be accessed at cms.law.
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