Offshore wind investment benefits from greater competition

22 June 2012

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22 June 2012 | Adam Leach

The government has stimulated greater competition for investment in wind power by awarding targeted licenses for the operation of single offshore platforms, according to the National Audit Office (NAO).

To meet a target of £8 billion of investment in offshore transmission by 2020, the government developed a funding model. Potential operators tender an annual amount they wish to be paid to operate the platforms where electricity generated by turbines is directed. The operator is then paid a controlled amount, based on the original price, by the National Grid, which in turn recoups its money from electricity suppliers.

Offshore electricity transmission: a new model for delivering infrastructure, published today, found the controlled pricing regime for specified assets drove competition. “This provided much more competition than either extending current onshore transmission regulated monopolies offshore, or awarding licences for whole zones by competition,” it said.

However, the spending watchdog raised concern over the length and the nature of the final deals that have been agreed. To ensure sufficient investment is attracted to offshore wind as opposed to onshore, licensees are given 20-year deals that rise annually with inflation. The NAO was concerned the value of the deal for consumers is heavily reliant on the assets being used to full capacity.

Amyas Morse, head of the NAO, said: “These new deals bring the benefit of competition but lock consumers into 20-year deals to pay prices increasing each year with inflation, whether the assets are used or not. Competition brings pressure to bear on the levels of those prices, but the terms of future deals will have to be refined to make sure consumers get best value in return for these long-term commitments.”


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