Large Transmission Contracts Awarded For Collection of UK Offshore Wind Energy

Ofgem, the UK energy regulator. Have named three preferred bidders to operate Electricity Transmission Links for connection of offshore Wind Farms to up to 2 million homes. The contracts will allow connection of up to 2 GW of power and are worth £700 million to the successful bidders, Balfour Beatty Capital Ltd, Macquarie Capital Group Ltd and Transmission Capital Partners.

The offshore wind farms are located in The east coast Thames Estuary, the Irish Sea off west coast Cumbria and Sheringham Shoal, off the East Coast near Norfolk. Seven of the proposed nine links have been assigned with just two more to be decided in the future.

These contracts brought strong competition with investments of over £4 billion on the table. Ofgem’s Chief Executive Alistair Buchanan said: “Attracting almost £4 billion 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 estimated saving of £350 million over equivalent onshore transmission costs will be good news for both consumers and the wind farm operators who will rely on this to distribute their electricity.

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.”

Investors will benefit from a 20 year RPI-linked revenue stream under a licence giving investors long-term regulatory certainty, and no automatic periodic regulatory review.