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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


Offshore transmission

Promoting choice and value for all

gas and electricity customers