- Ofgem’s regulatory framework secures £1.2 billion investment
in grid link connecting the world’s largest offshore wind farm
- Framework provides revenue certainty to investors while
saving consumers hundreds of millions of pounds on their energy
bills
- Ofgem is helping to deliver government target of 40GW
offshore wind by 2030 at the lowest cost to consumers
Ofgem has awarded a licence for the grid link to the world’s
largest offshore wind farm after securing a record £1.2 billion
investment.
Diamond Transmission Partners, a consortium led by Mitsubishi
Corporation, the Japanese industrial group, was selected by Ofgem
to own and operate the offshore transmission system linking
Hornsea One to the British mainland.
The grid link for the 1.2GW wind farm off the coast of Yorkshire
can deliver enough electricity to power more than one million
homes.
The UK government has set a target of 40GW offshore wind capacity
by 2030, almost quadruple the existing capacity, to help reach
net zero emissions by 2050. New electricity grid links are needed
to deliver this power to homes and businesses in Britain.
Under the regulatory framework, bidders compete to buy these
links from the wind farm developer. In return the winning bidder
receives a guaranteed level of income which is set by Ofgem for
running the link for up to 25 years.
Providing certainty in this way allows bidders to price very
keenly, reducing the costs of offshore wind and saving consumers
money.
Ofgem has awarded 21 licences through this process, with a total
of £5.7 billion being invested in grid links for 7.8GW of
offshore wind capacity.
The first 15 licences alone have delivered at least £700 million
in savings to consumers.
Ørsted, which built the Hornsea project, has built 12 offshore
wind farms in Britain in total.
Rebecca Barnett, deputy director for commercial and assurance at
Ofgem, said: “Today’s record investment demonstrates the appetite
of global investors to support the UK’s transition to net zero
emissions.
“Ofgem’s regulatory framework ensures that this investment can be
attracted at the lowest possible cost, saving consumers hundreds
of millions of pounds on their energy bills.”
Notes to editors
- Hornsea One wind farm is located 120km off the Yorkshire
coast and consists of 174 seven megawatt wind turbines.
-
Ofgem
has awarded the licence to own and operate the transmission
assets for Hornsea One to Diamond Transmission Partners, a
consortium comprising Mitsubishi Corporation and Chubu Electric
Power Co., Inc., a Japanese utility.
- The developer of the windfarm and offshore transmission
system is Ørsted and Global Infrastructure Partners. Ørsted’s and
Global Infrastructure Partners’ initial estimated value (which is
the forecast for the development and construction) of the
transmission assets was £1.396 billion. Following Ofgem’s
assessment of the final project costs, the final transfer value
Diamond Transmission Partners will pay to Ørsted and Global
Infrastructure Partners is £1.175 billion.
- The Offshore Transmission (OFTO) regime was developed by the
Department for Business, Energy and Industrial Strategy and
Ofgem, and was launched in 2009. For further information on the
OFTO regime, see Offshore
transmission tenders.
- Qualifying projects are grouped into competitive tender
rounds and announced together. Potential bidders are also
assessed at a pre-qualification stage, with qualifying bidders
able to bid on all of the projects within a tender round. The
Hornsea One wind farm’s offshore transmission system forms part
of tender round six which started in 2018. The other two
transmission systems in round six are to the East Anglia One wind
farm (initial tender value £813.6m) and to Beatrice wind farm
(£498.5m). Both are at Preferred Bidder stage. Ofgem will assess
consumer savings for the most recent tender rounds later this
year.
- To bolster the UK’s vibrant offshore wind sector, Ofgem is
working with government and stakeholders to enable a more
co-ordinated approach to offshore network development required
for the rapid growth of offshore wind power. The Government’s
offshore
transmission network review will explore how the offshore
transmission network could be designed and delivered,
consistent with the ambition to deliver net zero emissions by
2050.
