Ofgem has launched what’s expected to be its largest ever tender round for the offshore transmission assets connecting Hornsea 3 - one of the world’s biggest windfarms - to Britain’s power grid.
Tender Round 14 in Ofgem’s OFTO framework (offshore transmission owners), which launched today (Wednesday October 21) has an estimated value of around £3.5 billion.
The 14th Offshore Transmission Owner (OFTO) regime Tender Round will see investors compete to own and operate the transmission assets for Hornsea 3, one of the world’s largest offshore wind farms under construction.
Located over 100 kilometres offshore in the North Sea the project is due for completion by the end of 2027 and is projected to be able to power 3.3 million UK homes.
Under the OFTO regime, successful bidders receive a long-term, inflation-linked revenue stream for financing, operating and maintaining prebuilt transmission assets (which includes cables and offshore and onshore substations). Ofgem’s competitive tender process is designed to keep costs down for consumers and maintain high standards of performance.
Beatrice Filkin, Ofgem’s Director of Major Projects, said: 'Hornsea 3 is one of the world’s biggest windfarms. The offshore connection linking it to the onshore grid will help deliver home-grown energy to millions of British consumers as well as providing a great long-term opportunity for investors.
'By running a competitive process, Ofgem is helping attract the investment Britain needs for a cleaner, more secure energy system while making sure consumers get value for money.
'We'd encourage any would-be investors interested in finding out more about this major opportunity to get in touch and learn more about the process.'
Since its launch in 2009, the OFTO regime has seen winning bidders invest over £10 billion in links connecting 28 offshore wind farms.
Read more about the OFTO regime.
The OFTO framework forms a key element of the once in a generation modernisation of Great Britain’s energy system. It helps deliver clean electricity to homes and businesses and to meet the growing demand from transport, heating, industry and data centres.
This also strengthens energy security by making greater use of Britain’s renewable resources and reducing exposure to volatile global gas markets.
Background:
The OFTO regime
Ofgem’s OFTO regime underpins the government’s renewable energy targets by connecting homegrown offshore wind generation at least cost to consumers.
The competitive OFTO tender process ensures that offshore wind generators are partnered with responsible transmission owners that are the most efficient and competitive players in the market. This means lower costs and high standards?of service for generators and, ultimately, consumers.
Tender rounds, projects and licences
We run the competitive tendering process through tender rounds. Within a tender round we will assess bids and grant offshore transmission licences to bidders for specific transmission assets connected to offshore wind farms around Great Britain. The transmission assets are in parallel sold from the developer to the successful bidder.
Successful bidders under the OFTO regime receive an inflation-linked revenue stream for up to 25 years, subject to asset availability and performance.
Ofgem anticipates more North Sea offshore transmission assets to come to market through the OFTO framework in the future.
Source: Ofgem
