Ofgem shortlists four suitors for £2bn offshore wind assets
Ofgem has now shortlisted four operators for the next bidding round of its highly prized offshore transmission links, worth an estimated £2bn.
The energy watchdog will announce the four successful suitors following a qualifying round later today, inviting the selected companies to submit tenders to become offshore transmission owners (OFTOs).
This includes a consortium led by newcomers Gravis Capital Partners, which joins previous OFTO bidders EKITD Consortium, Diamond Transmission Partners and Transmission Capital Partners, CityAM can exclusively reveal.
All four bidders will be able to bid for the three offshore transmission assets of Dogger Bank A Offshore Wind Farm, Neart na Gaiothe Offshore Wind Farm and Moray Offshore Wind Farm (West) – going through the final invitation to tender (ITT) stage for each of the sites.
With the government aiming to nearly quadruple offshore wind generation to 50GW by the end of the decade, Ofgem has the task of managing the competitive tender process through which offshore transmission assets are sold and licences are granted.
The assets and licences are for the transmission of electricity generated by an offshore windfarm to bring it onto the onshore grid.
A competitive process has been designed by Ofgem so that generators are partnered with transmission owners that are the most efficient and competitive players in the market.
This should result in lower costs and higher standards of service for generators and, ultimately, consumers.
Overall, 10 offshore transmission assets worth £7bn are anticipated to come to market by early 2025, with the latest round the 10th of its kind.
Ofgem director of networks Rebecca Barnett said: “As we bring greater numbers of larger OFTO assets to market we are seeing increasing interest from investors and new bidding consortia coming forward. This increasingly competitive field is great for consumers because the extra competitive pressure ultimately helps keep energy costs down.
“Many investors are looking for green, sustainable investments that offer a steady, index-linked income – this is exactly what OFTOs provide. With a stream of multibillion pound OFTO assets coming to market over the next few years there are many opportunities for more investors and consortia to come forward and get involved.”
The OFTO regime has been in operation for 11 years, having so far brought in investment for 24 assets, with several more currently going through the process.
For each project, an OFTO will receive a guaranteed revenue stream for up to 25 years under the terms of their licence, subject to the availability of their assets.
Ofgem’s 10th tender round announcement follows the recent close of the eight allocation window, when Diamond Transmission Partners – a consortium comprising Mitsubishi Corporation and HICL Infrastructure – was selected by Ofgem in September 2022 as the preferred bidder to own and operate the Hornsea Two OFTO asset for the next 24 years.
The Hornsea Two OFTO asset serves the UK’s largest fully operational wind farm which will help power more than 1.4m homes – in a deal worth £1.14bn.