Joint DECC and Ofgem offshore transmission co-ordination project: Conclusions report published 1 March 2012

Offshore co-ordination of grid infrastructure is officially a “good thing” and, in the words of Charles Hendry, “we’d be crazy not to do it”.   This conclusions report, published on 1 March 2012, is the formal output of a joint DECC and Ofgem project looking at this issue for over a year. The report identifies the barriers to greater co-ordination of offshore grid and highlights proposed solutions. Ofgem then consults (via an accompanying consultation paper) on a number of those solutions. In this article we comment on the overall thrust of the report and consultation documents and some of the specific issues in more detail.

20th April 2012

Offshore co-ordination of grid infrastructure is officially a “good thing” and, in the words of Charles Hendry, “we’d be crazy not to do it”. 

This conclusions report, published on 1 March 2012, is the formal output of a joint DECC and Ofgem project looking at this issue for over a year. The report identifies the barriers to greater co-ordination of the offshore grid and highlights proposed solutions. Ofgem then consults (via an accompanying consultation paper) on a number of those solutions. The consultation closes on 26 April 2012.The table reproduced at the end of this article is a good summary from the report setting out the key areas identified for change now or in the future. In this article we comment on the overall thrust of the report and consultation documents and some of the specific issues in more detail.

Overall approach

There is no doubt that we should welcome any progress in this area – the economic benefits of moving away from radial windfarm to shore transmission links where there are clusters of projects offshore or where offshore reinforcements can ease onshore congestion on the network have been clearly established via the work of the DECC/Ofgem project and their consultants TNEI and Redpoint. What remains of concern is the amount of work still to do, both to implement the changes identified in the report and to do so in a way that really makes a difference to the hands on development of these complex projects.

Key issues

1. National Grid’s role - Amongst the measures proposed by DECC and Ofgem are the merging of the Offshore Development Information Statement (ODIS) and the Seven Year Statement both produced by National Grid (NG) as System Operator. The aim here is to provide an improved long term network planning document for NG and developers alike. This seems a sensible move and the consultation talks about this giving NG an enhanced role in facilitating efficient network development. The improvement of these system planning documents, however, does not mark a step change in that role – more of an incremental approach to build on the work NG has done recently via issuing integrateable offers.

2.  Anticipatory Investment (AI) – Ofgem is consulting on introducing a formal process for AI to be applied where NG identifies there are co-ordinated assets needed either due to the future needs of further offshore wind projects in the area or for wider system reinforcement reasons.Again, this is good news but the implementation of it is in its infancy in this document. Ofgem raise many issues and ask some pretty fundamental questions, many of which we had hoped would have been resolved over the past year of work and consultation by DECC and Ofgem in this area.

The overall pitch of the AI proposals is very guarded. Ofgem propose both an early and late “checkpoint” in the process to confirm for the developer concerned that the AI works will be regarded as something that may fall within the efficient and economically incurred costs of the developer and therefore recoverable by the developer.  Whilst this is driven by a wish to help the developer, it misses the point that AI is about taking a very early decision that some (potentially “extra” and potentially stranded in the long run) assets should be procured and paid for.

In addition, Ofgem propose that where the AI is driven by the needs of current and future offshore wind, largely the costs will be targeted on the developers (and particularly the first to develop). Where AI is driven by wider system needs, the AI costs will be socialised across other users. These distinctions will be difficult to make in some cases and these aspects of the consultation feel very complex and difficult to implement.

The Consulation Paper from Ofgem also questions who should carry out the AI works and under which method of OFTO appointment. Again it was hoped there would be more positive proposals from DECC and Ofgem regarding the roles of relevant industry stakeholders in the AI process. 

We believe that it will be important for industry to promote a simple and early mechanism for accessing AI which does not push undue financial risk onto the first to develop but maintains pressure on whoever develops the AI works to demonstrate that the costs have been efficiently and economically incurred. This should meet Ofgem’s concerns regarding the cost to consumers but also drive more certainty into the offer and acceptance process that it will be acceptable for early work to be carried out on AI assets.

3. Consenting – There are a number of proposals regarding consenting for AI works in the paper which are useful. In particular, the current guidance on associated development rules out AI works that are not regarded as subordinate to, or necessary for, the development of the particular project being consented. DECC highlights that it intends to amend the current statutory guidance to clarify that AI works can be regarded as associated with a particular project. 

4. User commitment – The Conclusions Report from DECC indicates that the current Code Modification Proposal to the Connection and Use of System Code (CMP 192) will, if adopted, reduce the proportion of liability a developer takes in securing works that may benefit other users.

5. Transmission charging – The conclusions report also notes that charging for coordinated networks offshore was not addressed via TransmiT (given the fact that the Offshore Coordination project was ongoing in parallel). Rather than come up with concrete proposals for TNUoS in this area, DECC and Ofgem have picked up on the recent NG paper on this subject and state here they are happy for the normal industry process to be followed. This means we can expect NG to bring forward a proposal to modify its Charging Methodology to cater better for offshore co-ordination in the near future via the CUSC modification process.

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