UK energy regulator Ofgem has a system of regulation to ensure that new offshore renewable energy projects are connected to the national electricity grid economically and efficiently. The process involves the granting of offshore transmission licences following a competitive tender process.
In 2010, Arup were involved in extensive due diligence for all nine projects in the first round of competitive tender, with a total value of over £1bn.
The firm’s work involved construction and operational due diligence including consents and environmental impact, performance and availability assessments. The suitability of technical equipment was assessed, as well as compliance with licence, operation and maintenance requirements. Costs and estimates for decommissioning at end of life were also investigated.
Key risks identified included the reliability, installation and ongoing monitoring of submarine cables. Availability was identified as a risk for all the projects.
Another important issue arose from the fact that wind farm and transmission assets on the projects were originally designed for single ownership, dividing them creating a number of new technical and contractual interfaces on offshore platforms.
To translate these technical findings into financial consequences, Arup applied our full understanding of the offshore transmission licences and financial incentive mechanisms. This was based on the firm’s extensive experience in the regulation of licensed transmission assets.