Coordinated Offshore Transmission can Anticipatory Investment deliver anticipated savings?

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1 Coordinated Offshore Transmission can Anticipatory Investment deliver anticipated savings? Guy Nicholson All Energy Head of Grid - RenewableUK Aberdeen 23 rd May 2012 Grid and Renewables Strategy - Senergy

2 Contents Coordinated Offshore Transmission can Anticipatory Investment deliver anticipated savings? What is coordination? Examples Regulatory Background What is anticipatory investment? What are the savings? What are the challenges? What needs to happen?

3 What is coordination? Offshore network co-ordination is the design of the connections to offshore renewables so as to minimise overall cost and/or timescales. There are many types, levels and facets to coordination therefore the term must be used with care to avoid confusion. Some coordination may be delivered within the development of an individual project others are more wide ranging, intra zone, across zones, with bootstraps and with interconnectors and so on. In some cases simple radial solutions will be optimal and no coordination is required.

4 Examples A 1. Intra zone 2. Inter zone 3. Bootstrap 4. Interconnector 5. In project (not shown) Source: TNEI / ODIS

5 Examples B Nearest connection to A triggers onshore reinforcements. Total cost = 70m+ 50m = 120m Therefore connect to 100m. Additional investment is needed in offshore assets 100m- 70m = 30m Minimum overall cost results. Source National Grid TCMF

6 Example C A generator with a single link to shore is vulnerable to a single point of failure. A 1GW generator may build 2x 0.5GW links to mitigate risks. Two 1GW generators can achieve partial redundancy by interconnecting projects and building only one link each. Source: TNEI OTCP

7 Background DECC and Ofgem launched the OTCP Offshore Transmission Coordination Project in early Working group, forums and consultants reports by Redpoint and TNEI. RenewableUK position paper on coordination January OTCP Reported in March Ofgem consultation on Anticipatory Investment March National Grid consultation on merging SYS and ODIS to an ETYS Electricity Transmission Ten Year Statement April Ofgem open letter on ITPR Integrated Transmission Planning and Regulation closes 25 th May 2012.

8 What is anticipatory investment? Anticipatory Investment investment that goes beyond the need of the immediate generation project. 500MW 500MW E.g. building a 2x1GW transmission links for a 4x 500MW windfarms. Anticipatory 1GW HVDC for 500MW 1GW HVDC for 500MW Interconnect Allowing Add 2x 500MW. 500MW 1GW HVDC Onshore 500MW 1GW HVDC

9 What are coordination savings? Financial Coordination estimated at GB benefit of 8-15% up to 3.5Billion for Round 3 offshore wind. Part of this is Anticipatory Investment element savings not identified. Interconnection benefits not estimated probably much bigger but no reference point for interconnection. Other benefits Reduced no of cables with reduced seabed and landfall corridors. Can enable faster windfarm project delivery and construction where grid is built in advance.

10 What are the challenges? Technology 2GW HVDC VSC is around but has not been delivered & needs supply chain. Utilisation risks Assets built early could possibly be under-utilised for a while. Generator build / project finance / OFTO build Can generators project finance construction for larger AI assets? Ofgem approval Ofgem is not renowned for taking such decisions. TNUoS charges Are unknown. Delay and uncertainty Important that Ofgem and DECC take steps to make project happen.

11 What needs to happen? Charging (TNUoS) for coordinated networks is uncertain and needs to be resolved. Generators building coordinated assets with larger capacity for anticipatory investment need to be certain that they can recover the costs and risks they made in building. Ofgem need to give clarity. There are more opportunities for interconnectors and these need to be considered e.g. by the ENSG Electricity Networks Strategy Group. Ofgem must approve some first AI projects. First AI projects need to be successful there must be low risk of prolonged underutilisation.

12 Thank you Guy Nicholson Head of Grid - RenewableUK Guy.nicholson@renewableUK.com Guy Nicholson Grid and Renewables Strategy Senergy Guy.nicholson@senergyworld.com RenewableUK Global Offshore Wind Conference th -14 th June, London