UK offshore transmission auction announced

6 June 2023

Britain’s energy regulator Ofgem has put out a call to prospective investors looking to bid for £7 billion worth of offshore transmission assets that are set to be auctioned off in two bidding rounds in 2024 and 2025. Around ten Offshore Transmission Owner (OFTO) assets, comprising prebuilt transmission connections for offshore wind farms, and providing guaranteed returns for 25 years subject to availability targets being met, will be auctioned.

The OFTO regime has operated successfully for 11 years, having so far brought investment in for 24 assets, with several more currently going through the process. The next two years is expected to see a surge in OFTOs coming to market, reflective of the UK government’s ambitious target of increasing offshore wind generation capacity fivefold to 50 GW by 2030.

The regime ensures compliance with competition laws that mean the offshore wind farm developer may not own the associated transmission link once the wind farm is operational. Its design means that the windfarm developer can build the transmission connection to its own specification, with full control over timescales, then be repaid the cost of the asset when it is auctioned off. The developer can then recycle that capital into further developments.

The next investment bidding round is due to begin in early 2024.

Akshay Kaul, Ofgem Interim director, Infrastructure and Security of Supply Group, said: “Britain already has the highest offshore wind deployment in Europe, and the second highest in the world. With the government’s target of 50 GW of offshore wind generation by 2030 there is still huge potential for investors to get in early and be part of an industry that’s set for huge worldwide growth.”

He added: “Investors can also rest assured that Ofgem is ensuring through regulatory reform such as our ASTI (Accelerated Strategic Transmission Investment), Holistic Network Design (HND) and Connections reforms that the necessary onshore infrastructure will be in place.”

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