Offshore transmission – will point to point connections become pointless in an integrated future?

The fifth of our series on offshore wind considers what future offshore grid connection may look like in the context of continued market growth in the sector

15 June 2021

Introduction

The fifth article in our offshore wind series explains the driving forces behind a need to move away from the incumbent grid connection system, and explores some potential alternatives. We have previously commented on the growing market for new offshore technologies such as floating wind (Floating Wind – Challenges and Opportunities for a Buoyant Technology) – this, considered together with calls to revamp the offshore wind grid connection system and the potential for regulatory change, sets the stage for an exciting era in the offshore wind sector.

To date, offshore wind farms have connected to the UK’s electricity grid by way of constructing individual routes of connection from offshore infrastructure to onshore infrastructure ('point to point connection'). While such transmission arrangements were suitable in the past – at one point, expectations were that offshore wind would provide only 10 GW of the UK’s capacity by 2030 – the UK’s commitment to reach net zero by 2050 has given further credence to existing concerns about the structure of the UK’s offshore wind regime.^{^[1]} It is hoped that the ongoing offshore transmission network review ('OTNR'), spearheaded by the Department of Business, Energy & Industrial Strategy ('BEIS'), will address such concerns and provide suitable recommendations for an alternative way forwards.^{^[2]}

Point to point connection – why change?

To achieve net zero emissions of greenhouse gases by 2050, the Climate Change Committee recommended^{^[3]} that, based on its 'Balanced Pathway' multiple scenario model, offshore wind capacity must reach between 65-125 GW.^{^[4]} The UK’s current operational offshore wind capacity stands at 10.4 GW and whilst there is a further 30 GW of capacity under construction, under offer of government support, or in the development and pre-planning stages^{^[5]} this still leaves a sizeable gap to be filled (not to mention the government’s goal of reaching 40 GW of offshore wind capacity by 2030^{^[6]}).

The prospect of such a significant increase in capacity and its supporting infrastructure, including grid connection infrastructure, has brought to the fore the need to co-ordinate the grid connection system to ensure both (i) the costs of construction are economical; and (ii) the associated infrastructure’s impact on the landscape (both onshore and offshore) is less invasive. Such co-ordination and reimagining of the point to point connection is a focus of the OTNR. The factors inspiring this system reboot are summarised below:

Impact on local communities

The biggest drivers of change in this area are concerns from local communities about the disruption caused by constructing and maintaining individual point to point connections. Such disruption ranges from impacts on traffic and the hospitality industry in coastal towns to continuous construction works associated with the onshore infrastructure (e.g. cable route and substation construction) and is only likely to increase during the rollout of the ambitious offshore wind pipeline.^{^[7]} Campaigners against offshore wind farms in the Norfolk area have relied on such arguments in the face of new developments including Hornsea Three, Vanguard and Boreas. Ahead of Ørsted’s Hornsea Three gaining approval in December last year, a group of 30 parish councils in Norfolk also demanded that an offshore ring main should be considered as an alternative to point to point connection.^{^[8]}

Delay to the offshore wind pipeline

Earlier this year, Vattenfall’s Vanguard was subject to judicial review. In considering the original development consent, the High Court determined that insufficient consideration had been given to the cumulative impact of both the Boreas and Vanguard projects on Necton (the planned location for the onshore substations for both projects).^{^[9]} As a result of the High Court’s decision requiring the Secretary of State to re-determine Vattenfall’s application for development consent for Vanguard, the consenting process for Vattenfall’s linked development of Boreas has also been delayed.^{^[10]} BEIS Secretary of State Kwasi Kwarteng has commented on such delays, recognising the potential impact this could have on progress of offshore wind development, and indicating the unease in the sector with the current system.^{^[11]}

Efficiencies of build and cost reduction

Eliminating the need to construct individual points of connection for each wind farm, as well as the relevant grid reinforcements, is undoubtedly an area in which significant savings could be made once the relevant technologies are sufficiently developed. It is estimated that multi-purpose interconnectors ('MPI'), one of the proposed alternatives to point to point connection (see below), could save consumers £6 billion by 2050 due to the reduction in grid infrastructure needed.^{^[12]} MPIs would utilise the existing technology of interconnectors which provide a point to point connection to transmit electricity between two countries and allow surplus renewable electricity to be exploited when needed. By connecting clusters of offshore wind farms to an interconnector, the infrastructure needed to connect wind farms to the transmission grid would be greatly reduced. National Grid has described such a model as a potential 'offshore connection hub for green energy'.^{^[13]}

Reducing the infrastructure required should also help to alleviate objections from local communities, and streamline the consenting process – lessening some of the financial burden on developers. Given future projects are granted around clusters of particular areas of the seabed, a shared offshore infrastructure appears to be a logical progression of the technology, although its impacts on the current regulatory regime will need to be thoroughly considered.

Pressure to deliver a sustainable pipeline of offshore wind is ever increasing and it is clear that the impact of point to point connections on local communities and the environment must be taken seriously to avoid delays to pipeline delivery and ensure that the government’s offshore wind goals can be achieved. As an example of this mounting pressure, in response to the Vanguard judicial review decision, Deputy Chief Executive of RenewableUK Melanie Onn highlighted that, thanks to COP26, the spotlight will be on the UK this year to uphold its 'global lead' in offshore wind.^{^[14]}

Regulatory requirements

The case for overhauling the offshore wind transmission system is therefore strong – but regulatory limitations will need to be considered prior to any material change.

The current regulatory framework, by which generators are typically required to sell the transmission assets to an offshore transmission owner ('OFTO') within 18 months of constructing a wind farm, is not currently equipped to handle a scenario involving a common grid connection. Updating the OFTO regime will be one of the first steps towards co-ordinating the offshore transmission system. Any shared grid connections will of course increase the interfaces between developers and other parties. It will therefore be essential to consider the appropriate allocation and apportionment of risk to ensure the sustainability of offshore wind projects from investors’ perspectives, as well as ensuring security of supply in the event of any dispute concerning these interfaces.

As part of the OTNR, BEIS and Ofgem are consulting on how to accommodate a shift away from the point to point connection model by redesigning the regulatory and legislative framework for offshore wind. While several models are still being considered, it is anticipated that the applicable primary legislation will change.^{^[15]}

Given a key driver of the OFTO regime is to reduce costs of purchasing energy to end consumers, the economic and efficient costs associated with a developing a shared infrastructure to a cluster of projects is likely to be an attractive area of development for Ofgem.

What will this change look like?

Several alternatives have been put forward to replace the point to point connection model:

Offshore ring main - some, such as the parish councils in Norfolk, have advocated for an offshore ring main – an offshore system connecting all the wind farms in a certain area to shore via one connection point. Due to current limitations on cable capacity (outside of the transmission issues present in HVAC / HVDC technology, cable capacity is currently limited to up to 2 GW, which restricts the number and size of wind farms that could be connected to one offshore ring main) and the lack of provision for shared connections in the OFTO regime (which currently contemplates that each project has its own transmission cable which is maintained by a separate OFTO), this option has been dismissed by some in the industry.^{^[16]}

Interconnectors - interconnectors are used to connect the energy transmission systems of two countries. It is an efficient system as it allows surplus output to be redirected as needed, and is ultimately cheaper for consumers. It is hoped that MPIs may be able to create offshore wind hubs and replace the point to point connection system.^{^[17]} The UK has recently signed up to a co-operation agreement with the Netherlands to determine whether interconnectors and offshore wind farms can be combined in this way. If successful, this project would be operational by 2029 – meaning that we may still be some way off determining the feasibility of such a project.^{^[18]} However, National Grid is positive that given the status of interconnector technologies, MPIs could be developed relatively quickly.^{^[19]} In the meantime, the OTNR is exploring the option of MPIs and looking to adapt the regulatory framework to accommodate such technology.^{^[20]}

Hydrogen - we recently delved into the emerging synergies between offshore wind and hydrogen electrolysis (Offshore Wind – Exploring the advent of Green Hydrogen Power). If hydrogen electrolysis units can be integrated into offshore wind farms, point to point connections could be replaced entirely by pipelines and shipping routes. As such integrated projects could eliminate the need for individual grid connections, this is clearly an attractive option and several key players in the industry have already invested in initial projects. Falling costs in producing electricity via offshore wind, together with greater availability of large-scale hydrogen electrolysers have combined to create a favourable market for investing in this technology. However, as with MPIs, it is likely to be some time before such integrated systems could feasibly replace the point to point connection model.^{^[21]}

Jointly owned transmission assets - an alternative to a nationally owned ring main could be for clusters of projects to co-operate and develop a shared transmission route and infrastructure for each offshore wind cluster. Whilst this would require much greater co-operation and interface than is currently expected of developers, it would allow all participants to benefit from reduced build cost given the costs of developing the transmission assets could be split amongst the cluster participants.

Key to integrating any new offshore transmission solution into the offshore wind network is investment in demonstration projects, buy in from the regulators and the adaptation of the regulatory framework. It will also be vital to consider how funder’s interests can be protected and whether there may need to be any ring-fencing of the transmission assets depending on the structure deployed; this will need to be worked through in the context of the project specific structures. As advisors on multiple hydrogen projects, we are alive to the market’s interest in and investment into developing this technology’s potential. It is also clear that accommodating MPIs in the offshore wind regulatory framework is a key focus of the OTNR.

Construction issues

It is clear that any alteration to the current build out solutions for the sector will present new construction challenges, particularly in relation to the possible increased interface between projects that some of the proposed solutions create. The sector will need to consider what this interface may look like as demonstration projects are deployed – some points that developers may want to consider are:

Interface issues - the complexity of a traditional offshore build can lead to multiple interface issues depending on the number of contracts utilised to deliver the programme. Traditional structures can range from a number of key EPC packages to a highly managed multi-contract approach. If additional stakeholders and interested projects are added into an already complex process, the interface issues could increase exponentially. Ultimately, the impact of any co-ordinated or shared build solution will be dependent on whether developers are co-operating to facilitate a build out to a cluster themselves or connecting into a nationally developed offshore ring main.

OFTO - the current regulatory regime anticipates that post-build the transmission assets will be sold to an OFTO who will maintain the assets for a single project. Any shared solution will need to see the regime modified to allow for an OFTO to potentially service multiple projects. Additionally, during the course of any divestment, ongoing construction and / or maintenance issues will need to be considered as this could impact the wind farms connected to the transmission assets maintained by any given OFTO. The extent of this interface will be guided by the procurement and construction process and interested parties should consider appropriate mitigation at the procurement stage to ensure a smooth divestment.

Defects - depending on the nature of any shared transmission assets, projects could have differing interests in the remediation of defects. It is usual for developers and contractors to schedule certain remedial works in periods of turbine downtime to minimise a loss of generation capacity. This may not be possible on a cluster with a shared connection point if projects have become operational at different times and are therefore subject to different downtime / maintenance timelines.

Co-ordination - if a jointly owned transmission option is deployed, developers will need a close level of co-operation between projects to ensure that the transmission works are delivered to the appropriate programmes and with the necessary technical capacity required by different design needs.

In our experience, the importance of the procurement structure and early engagement with interested parties should not be underestimated by stakeholders looking to deliver an innovative solution smoothly.

Should you have any thoughts or queries in relation to the development of innovative grid solutions and their construction, our offshore wind specialists are always available to discuss the process with you.

Next steps

The OTNR is now in the midst of developing options and engaging with developers (round 2). Consultations are expected in the summer of this year. The promising futures of both MPIs and green hydrogen are paving the way to a more efficient, sustainable, and secure offshore wind energy supply. COP26 will take place later this year against a positive backdrop of significant investment in the UK into redesigning and future-proofing the offshore wind grid connection system.

For the other articles in our offshore wind series, please see:

This article was written by Lloyd James and Craig Bruce.

[1]https://www.offshorewind.biz/2020/07/16/uk-starts-offshore-transmission-network-review/

[2]https://www.gov.uk/government/publications/offshore-transmission-network-review/offshore-transmission-network-review-terms-of-reference

[3] in its report ‘The Sixth Carbon Budget: The UK’s path to Net Zero’

[4]https://www.theccc.org.uk/publication/sixth-carbon-budget/

[5]https://www.thecrownestate.co.uk/media/3792/offshore-wind-operational-report-1.pdf

[6]https://www.gov.uk/government/news/new-plans-to-make-uk-world-leader-in-green-energy#:~:text=Confirming%20offshore%20wind%20will%20produce,previous%2030GW%20target%20to%2040GW.

[7]https://www.rechargenews.com/wind/five-big-problems-for-offshore-wind-angry-birds-grumpy-neighbours-and-more/2-1-870639

[8]https://www.edp24.co.uk/news/campaigners-despair-after-orsted-wind-farm-decision-6878876

[9]https://www.offshorewind.biz/2021/02/18/dco-decision-for-norfolk-vanguard-owf-quashed/

[10]https://www.offshorewind.biz/2021/05/13/decision-on-norfolk-boreas-dco-application-postponed-until-december/