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Offshore Transmission. Giles Stevens Head of offshore electricity transmission. Contents. Regulatory approach Attracting investment User requirements & commitments A potential scenario. Regulatory approach.

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Presentation Transcript
offshore transmission

Offshore Transmission

Giles Stevens

Head of offshore electricity transmission

contents
Contents
  • Regulatory approach
  • Attracting investment
  • User requirements & commitments
  • A potential scenario
regulatory approach
Regulatory approach
  • Approach must ensure that sound investment decisions provide the best value to consumers and offshore transmission users
  • Sound investment decisions require:
    • Co-ordination
    • Minimising risk of stranded assets and ‘gold plating’
  • To deliver best value to consumers and network users, the regulatory approach must:
    • Enable necessary investment to deliver economically efficient, fit for purpose, transmission infrastructure
    • Provide certainty to investors in offshore transmission
attracting investment 1
Attracting investment 1
  • Investors in offshore transmission will need certainty
  • What risks are private investors exposed to?
    • Scope
    • Timing
    • Development
    • Construction
    • Financing
    • Operation
    • Returns
  • Price control can give certainty over:
    • Regulated asset value
    • Performance requirement
    • Returns
    • Incentive/penalty regime
attracting investment 2
Attracting investment 2
  • The following are likely to be required:
    • Fair and transparent selection process
    • Competitive pressure
    • Independent ownership of offshore transmission assets
    • No unfair advantage to incumbents
    • Clear definition of scope of work i.e. technical standards
    • User commitment from generators
    • Enduring regulatory structure, including mechanisms for change
user requirements
User requirements
  • Capacity
  • Location
  • Additional capacity
  • Performance
    • Availability
    • Time to repair
    • Delivery date
user commitment
User commitment

TO ensure offshore transmission networks are not stranded investments, need:

  • Commitment from generators for transmission build
  • Commitment to be in place before transmission investment
  • Most efficient investment will take place once all generators committed
  • Scope of transmission work dependent on firm signal from generators
geographic areas
Geographic areas

The following options were set out in the scoping document

  • Single zone

Pros

Easiest way to allocate

Economics of scale

  • Cons
  • Scale (£1bn+) likely to deter all but largest players
  • Less opportunity for competition
  • ‘Eggs in one basket’
  • No comparison/benchmarking possible
  • Few ( 3 – 5)

Pros

Reasonable investment scale

Economics of scale

Opportunity for competition

‘Spread the risk’

  • Cons
  • More complex regime
  • Needs cooperation from generators
  • Many (17 zones)

Pros

Point to point approach

Easy to implement

  • Cons
  • Few opportunities for economies of sale
  • More complex regime
  • Investment may be too small to be attractive
one potential scenario 1
One potential scenario (1)
  • Geographic areas
    • 3 or 5 (as projects of £2-500m maybe most attractive to investors)
  • Security standards
    • Present standard, single fault etc
  • Connection requirements
    • Generator provides up front commitment
    • Offshore TO responsible for providing most economic and timely connection
  • Scope
    • Requirements defined by generators to get least cost solution
one potential scenario 2
One potential scenario (2)
  • Selection of Offshore TO’s
    • By competition
  • Price control
    • Provides long term RAV certainty
    • Regular efficiency reviews
    • Provides detailed arrangements for investment risks to be managed:
      • Adoption
      • Changing scope
      • Offshore TO failure
slide11

Promoting choice and value for all

gas and electricity customers

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