Energy regulator Ofgem is seeking investors willing to pledge up to £7 billion for offshore transmission assets.
Around ten offshore transmission assets, comprising prebuilt transmission connections for marine wind farms, will be going under the hammer in two bidding rounds set for 2024 and 2025.
Since Ofgem and government launched the Offshore Transmission Owners (OFTO) regime in 2012, winning bidders have invested over £6 billion in links connecting 24 assets, enabling 9.5GW of marine wind farms. Several more are currently in the pipeline.
The next two years will see a surge in OFTOs coming to market, reflective of the UK Government’s target of quintupling offshore wind generation capacity, to 50GW by 2030.
Competition laws mean offshore wind developers may not own associated transmission links, once marine farms begin generating.
Developers are permitted to build transmission connections to their own specifications, and be repaid an asset’s cost when it is auctioned off. The developer can then recycle that capital into further developments.
Ofgem claims existing OFTO investors have benefitted from stable returns, guaranteed for up to 25 years. After the coming two investment rounds, more are likely to follow.
Earlier this week Ofgem hosted a conference in London for potential bidders, including banks, and investment and asset management firms.
Akshay Kaul, the regulator’s interim director for infrastructure, told delegates: “OFTOs are an important part of a multi-billion-pound investment Ofgem is facilitating through its regulation of energy networks. They deliver on energy security and affordability for Britain’s consumers by reducing our reliance on expensive imported fossil fuels.
“They offer investors attractive index-linked steady returns for 25 years.
“Britain already has the highest offshore wind deployment in Europe, and the second highest in the world. With the Government’s target of 50GW 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.”