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Energy Bill update

Offshore Electricity Transmission – reassurance for developers

In short

Clause 105 of the Energy Bill makes a small, but nevertheless important, amendment to the provisions in the Electricity Act 1989 (the 1989 Act) which prohibit unlicensed participation in the transmission of electricity. 

Regulatory Regime for Offshore Wind Development and Transmission

The amendment in Clause 105 is being made in the context of the regulatory regime which governs the development of offshore wind generation and associated transmission assets, which mandates that offshore transmission assets be operated by offshore transmission owners (OFTOs) who hold a transmission licence granted following a competitive tender process undertaken by Ofgem.

Two options will be available to the developer of an offshore wind project for procurement of the electricity transmission assets which will convey the electricity generated by the wind farm to the onshore network, namely:

  • the developer may opt to build the offshore transmission assets itself and transfer the assets via an Ofgem run competitive tender process to an OFTO after the assets enter commercial operation following the completion of commissioning and the passing of the contractual performance tests (the so-called generator-build option); or
  • the developer may instead opt to appoint an OFTO (again following an Ofgem competitive tendering process) to build the offshore transmission assets (the so-called OFTO-build option).

Ofgem also published on 22 May 2012 updated proposals on the tender arrangements for both options under the enduring regime for offshore transmission. We have seperately produced an overview of the updated proposals. 

Clause 105

Clause 105 has the effect that an offshore wind developer using the generator - build option is not to be regarded as participating in the transmission of electricity if certain pre-conditions are met and, specifically, the conditions that:

  1. the transmission takes place at any time prior to the first anniversary of the date on which the relevant completion notice is given by the NETSO (the National Electricity Transmission System Operator) to Ofgem – broadly, the notice indicating the NETSO's acceptance of the offshore transmission assets; and
  2. the transmission assets have been qualified into Ofgem's competitive tendering process.

Summary

Clause 105 provides welcome reassurance to developers who opt for the generator - build option that the conveyance of electricity through offshore transmission assets prior to their transfer to an OFTO will not be in contravention of the prohibition on unlicensed participation in the transmission of electricity in the 1989 Act. 

It is important to note, however, that the exemption in Clause 105 is time-limited (expiring one year after the date of the completion notice) and therefore strikes a balance between the need, on the one hand, for generators to be able to undertake whatever testing and commissioning activities are required to bring the assets into commercial operation and, on the other, the need to ensure that the assets are transferred into the ownership of an OFTO without undue delay.

Return to our Energy Bill update.