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Offshore Transmission

Offshore Transmission. Giles Stevens Head of offshore electricity transmission. Contents. Regulatory approach Attracting investment User requirements & commitments A potential scenario. Regulatory approach.

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Offshore Transmission

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  1. Offshore Transmission Giles Stevens Head of offshore electricity transmission

  2. Contents • Regulatory approach • Attracting investment • User requirements & commitments • A potential scenario

  3. Regulatory approach • Approach must ensure that sound investment decisions provide the best value to consumers and offshore transmission users • Sound investment decisions require: • Co-ordination • Minimising risk of stranded assets and ‘gold plating’ • To deliver best value to consumers and network users, the regulatory approach must: • Enable necessary investment to deliver economically efficient, fit for purpose, transmission infrastructure • Provide certainty to investors in offshore transmission

  4. Attracting investment 1 • Investors in offshore transmission will need certainty • What risks are private investors exposed to? • Scope • Timing • Development • Construction • Financing • Operation • Returns • Price control can give certainty over: • Regulated asset value • Performance requirement • Returns • Incentive/penalty regime

  5. Attracting investment 2 • The following are likely to be required: • Fair and transparent selection process • Competitive pressure • Independent ownership of offshore transmission assets • No unfair advantage to incumbents • Clear definition of scope of work i.e. technical standards • User commitment from generators • Enduring regulatory structure, including mechanisms for change

  6. User requirements • Capacity • Location • Additional capacity • Performance • Availability • Time to repair • Delivery date

  7. User commitment TO ensure offshore transmission networks are not stranded investments, need: • Commitment from generators for transmission build • Commitment to be in place before transmission investment • Most efficient investment will take place once all generators committed • Scope of transmission work dependent on firm signal from generators

  8. Geographic areas The following options were set out in the scoping document • Single zone Pros Easiest way to allocate Economics of scale • Cons • Scale (£1bn+) likely to deter all but largest players • Less opportunity for competition • ‘Eggs in one basket’ • No comparison/benchmarking possible • Few ( 3 – 5) Pros Reasonable investment scale Economics of scale Opportunity for competition ‘Spread the risk’ • Cons • More complex regime • Needs cooperation from generators • Many (17 zones) Pros Point to point approach Easy to implement • Cons • Few opportunities for economies of sale • More complex regime • Investment may be too small to be attractive

  9. One potential scenario (1) • Geographic areas • 3 or 5 (as projects of £2-500m maybe most attractive to investors) • Security standards • Present standard, single fault etc • Connection requirements • Generator provides up front commitment • Offshore TO responsible for providing most economic and timely connection • Scope • Requirements defined by generators to get least cost solution

  10. One potential scenario (2) • Selection of Offshore TO’s • By competition • Price control • Provides long term RAV certainty • Regular efficiency reviews • Provides detailed arrangements for investment risks to be managed: • Adoption • Changing scope • Offshore TO failure

  11. Promoting choice and value for all gas and electricity customers

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