Review of the offshore transportation network – Lexology
The government published a consultation “Review of the offshore transport network: sustainable regime and multi-purpose interconnections”, soliciting advice on sustainable regime approaches to planning, developing and delivering sea transport. latest in a series of consultations on the future of the UK energy system. See our previous articles.
Why is change needed?
Under the current regime, introduced when offshore wind was an emerging industry, developers control the location of a wind farm and how it connects to the mainland, assuming of course that National Grid could offer a connection. to the appropriate network for the desired substation. Each wind farm has an individual connection to the land transport network. Due to the unbundling rules, they would then be required to dispose of these transmission assets as part of OFTO operations. In addition, “point-to-point” HVDC submarine interconnections, whether subject to a cap-and-floor regulatory regime or merchant (such as the Acquind project) must obtain an individual grid connection at the same time. ‘desired location, although often subject to displacement as part of the connection. and the Infrastructure Options Note (CION) process.
The current uncoordinated approach, if not addressed, could be a barrier to future offshore wind projects, especially given the impact of individual transport links on the environment and the construction of infrastructure. down.
To remedy this, the government is proposing to adopt a more strategic approach to the installation of offshore wind power and a more centralized approach to the design of associated transport, aimed at reducing cumulative impacts on the environment. At the same time, some interconnection developers are offering so-called multi-purpose (or MPI) interconnects which are not only point-to-point between the two interconnected countries, but which also daisy-chain with offshore wind farms, potentially signaling the decline of the OFTO primary market for the new OFTOs.
The review covers the entire end-to-end process of developing a wind farm: leasing the seabed, connecting to the grid, planning and approval, the regime for determining who is designing and constructing the transmission asset, l government assistance allocation (such as contract for difference) and transmission pricing.
What is on offer?
One of the questions asked during the consultation is whether there should be a strategic plan. A strategic plan would identify the geographical areas for the development of wind farms, the indicative routes of the cable corridors, the areas for the associated infrastructure, the points of connection to the land transport network and any necessary reinforcement.
This integrated approach would seek to secure the best locations for end-to-end infrastructure and would be better able to examine and address environmental impacts at an early stage.
A centralized approach could also enable a holistic grid design, integrating the offshore transmission grid with onshore transmission, use and storage of captured carbon and potentially hydrogen.
To decide on possible models for the sustainable diet, the consultation considers:
- whether there is a need for strategic planning upstream of offshore wind production;
- whether there is a need for a holistic network design and key design choices;
- possible delivery models; and
- the timing of the transmission design and delivery (“early” or “late”).
Based on different combinations of answers to these questions, 7 potential delivery models were proposed, falling into two broad categories:
- those that retain the developer-led approach but make incremental changes to encourage coordination; and
- those who introduce the design and delivery of centralized holistic networks for offshore transmission.
The choice of model will depend on the allocation of risk between the private sector and the consumer; the impact on costs; Business plans; and attract funding from the private sector.
If a strategic plan were adopted, it would present a vision for 2050 and would be updated every 5 years.
Benefits and Risks
Coordination could provide opportunities to reduce costs through infrastructure sharing, but there would be less competitive pressure, potentially leading to higher costs for the consumer.
The overall design should be based on a “production map” showing the location, capacity and completion date of the wind farms to be connected. If any of the assumptions prove to be incorrect, the network could be oversized or the design would have to be changed at a later stage to allow additional production.
The timing of the detailed design and delivery of the transmission is important: early delivery would give developers more certainty, but not knowing which projects will reach the final investment decision would complicate efficient network design. On the other hand, finalizing the transport design later in the process will mean more certainty about which production to connect, but if the transport is subsequently delayed or not delivered, the developer will end up with a stranded asset.
Multipurpose interconnectors (IPMs) combine the functions of connecting offshore transport to the continent and connecting from one country to another. They can play a role in providing a coordinated approach to transport infrastructure by helping to reduce the number of land-end points of land-based network connections as well as reducing the costs of investment and maintenance. operation and reducing the amount of wind that needs to be reduced.
A consultation published by Ofgem on July 14 considered two main concepts for IPMs:
- combine a radial onshore connection from a GB offshore wind farm with another direct connection from the GB wind farm to the electricity grid or wind farm of a neighboring country, allowing cross-border electricity flows; and
- where a point-to-point interconnect cable also includes direct connections to offshore wind farms that use the interconnect as a connection to the market.
The evidence gathered during the Ofgem consultation will inform the government’s approach to a sustainable regime for PMIs. Ofgem is expected to announce its point of view at a workshop in October and then publish its final point of view in November 2021. It should consider the current cap and floor regime to be an appropriate framework for IPMs and that the ITPR does not provide sufficient certainty for PMIs. It is possible that Ofgem will delay any decision regarding the cap and floor regime for MPIs until the conclusion of the offshore transmission system review due to the need to clarify the following matters:
- legal definitions and use of assets
- market agreements
- billing terms; and
- EU regulatory alignment and 70% unbundling rule.
Which projects will be affected?
To implement the necessary changes without creating delivery risk for projects already in development, the sustainable regime will focus on projects that will go through future seabed rental rounds, so Crown Estate rental rounds are going beyond the recently completed offshore rental round 4 and Crown Estate Scotland is doing rental tours beyond ScotWind.
There are two other lines of work in the Marine Transportation System Review:
- The first opportunities focus on projects that are at a relatively advanced stage in the development process and plan to make changes to the current regulatory framework.
- Pathway to 2030 focuses on projects that have won seabed leases in 2021 or will do so by 2022. This workflow also explores options for holistic network design and transmission delivery schedule, but works on different timelines than the sustainable diet (i.e. this consultation).
Based on a production board that is expected to go online by the early 2030s, ESO will continue work on a holistic network design, with a view to completing the design by the end of January 2022.
A considered position on a preferred medium-term delivery model for offshore transport is expected this year; followed by a consultation of Ofgem on the details of the preferred model and another consultation on its implementation.
The sustainable regime proposals are intended to apply to projects that are to be operational after 2030.
The Consultation ends on November 23, 2021.
Some of the proposals in this consultation represent a major change in the way offshore wind farms could be developed in the future. MPIs are a loose classification for a number of different configurations ranging from point to point at hubs where multiple offshore wind projects would also connect to offshore wind project sites cascading into what is in effect an offshore grid. Nascent HVDC. We could see a fundamental shift from a developer-led approach to a much more coordinated one, with National Grid ESO (depending on the outcome of the future system operator’s process) playing a more proactive role in determining a strategic plan that takes into account the network considerations (such as the location of projects close to demand), interactions with CCUS sites, environmental impacts and strengthening of the terrestrial network. One option is even to combine seabed rental, connection offers and CfD support into a single competitive process, as in Germany.