Balfour Beatty Capital, Macquarie Capital and Transmission Capital Partners have been named as preferred bidders by energy regulator Ofgem in a £700 million deal to connect up to 2 GW of energy from windfarms to the grid.
The preferred bidders have been selected to own and operate the first £700m worth of transmission links to seven offshore wind farmsm, following a tender process run by energy regulator Ofgem.
This deal is part of a joint Department of Energy and Climate Change and Ofgem scheme to encourage investment in high voltage transmission links for the potential 50 GW of new offshore wind generation.
In all, nine transmission links will form part of the first wave of contracts awarded. These are worth around £1.1 billion but interested firms lodged their interest with around £4bn in total committed.
The firms have bid for the right to own and operate the offshore transmission links in return for a 20-year regulated revenue stream.
The current tender round is said to have resulted in overall forecast savings of £350m for offshore wind farms and ultimately consumers.
Highlighting the attractiveness of owning and running the assets under the regulatory system. Ofgem’s chief executive Alistair Buchanan said: “Attracting almost £4bn of investment appetite in today’s capital markets, following the financial crisis, shows how an Ofgem-run competitive regime for regulated revenue streams can prove very effective at attracting investment.”
The Secretary of State for Energy and Climate Change, Chris Huhne, said: “Offshore wind has a vital part to play in the delivery of our renewable energy targets. The decision on the preferred bidders for these licences is the first step in ensuring that offshore wind farm connections are operated in a cost effective and secure manner.”
The remaining two projects are Ormonde and Greater Gabbard.
Three bidders have been selected to submit Best and Final Offers for the Ormonde transmission project.
The Invitation to Tender stage is to be re-run for the Greater Gabbard project, which will enable a simplified transfer of the phased transmission assets to the offshore transmission licensee in accordance with the offshore regime commencement orders recently signed by the Secretary of State.
Following the success of the competitive tender process, DECC and Ofgem will shortly be consulting on Ofgem running tenders, under the enduring regime, that allow developers the choice of seeking offshore transmission licensees to either take on responsibility for:
- the ongoing finance, operation and maintenance for transmission links designed and built by the generator developer and transferred to the operator upon completion of construction; or
- the design, construction, finance and on-going operation and maintenance of the transmission links.
In total high voltage cable links worth over £20bn would be needed to connect a potential of around 50 GW of offshore wind over the coming years.