Isra-Mart srl:Ofgem predicts offshore wind transmission bidding war

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Companies will compete for the right to own and operate lucrative transmission links to giant offshore wind farms such as the London Array and Gwynt-y-Mor after Ofgem yesterday kicked off a new tender round for some of the UK's largest wind energy projects.

The process will throw up preferred bidders for about £1.9bn of high-voltage links to six offshore wind projects, totalling 2.8GW of capacity. Winners should be announced next spring and will control the connections for 20 years.

Tenders for the first three projects, Gwynt-y-Mor, Lincs and the London Array, started today, while the process for the Humber Gateway, Race Bank and West of Duddon Sands farms are expected to begin in spring 2012 once the facilities have met necessary qualifying requirements.

Ofgem believes Britain needs to plough £200bn into its energy industry over the next decade, of which £20bn will be needed to connect wind farms to the shore, if it is to meet renewable energy targets. Along with the Department of Energy and Climate Change (DECC) the watchdog introduced the offshore transmission regime last year as part of an effort to drive down the costs of building network links between offshore wind farms and the mainland grid.

This is the second tender round under the regime after the previous round attracted bids totalling almost £4bn for the £1.1bn worth of transmission links. Transmission Capital Partners, Macquarie Capital Group and Balfour Beatty Capital were ultimately named as preferred bidders for seven projects, representing 2GW of offshore wind energy capacity.

Ofgem said the first round of tenders generated savings of about £350m and revealed that it is expecting similarly competitive bids for future rounds.

"It is very encouraging that we have seen such strong competition for the first round of transmission links," said Ofgem chief executive Alistair Buchanan. "This looks set to continue for the second round and healthy competition will keep the costs of the links as low as possible and give generators confidence that the offshore regime is proving very attractive to investors and is bringing new players into the UK transmission market."

Energy minister Charles Hendry, who attended the launch, added: "We have 40 per cent of Europe's wind and we have 11,000km of coastline. We ought to be using those resources for our future energy security, but to do this we need to get the investment in the infrastructure that will make this happen."

The announcement came on the same day as a new report from consultancy giant Capgemini concluded that the EU was on track to meet its target of reducing emissions 20 per cent by 2020, but was falling behind in its ambition to generate 20 per cent of energy from renewables by the same date.