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The importance of the transmission system

Martin Simpson, Head of New Energy & Technology

10 January 2013

The important role of the transmission system for offshore renewables and more!

We are all aware of the significant role that offshore renewables can play in the UK - jobs, inward investment, security of energy supply and environmental protection - and significant emphasis is, correctly, placed on getting the right policy framework and incentive structure in place to ensure the energy from the vast natural resources we have harnessed for the benefit of the nation. However, the essential role of the electricity transmission system in transporting power from generators located in often challenging locations - up to 200 nautical miles offshore - to end customers is often overlooked. This could be a costly mistake.

If you think of all power generation sources as akin to our organs, then the transmission system is like our arteries, flowing energy around from source production to where it's required at any one time. These two activities are necessarily interlinked within the electricity market and both play a significant role to power all corners of the country. By 2020 the UK has a binding EU target to achieve fifteen per cent of our energy supply from renewable sources. As an island nation, our marine resource (offshore wind, wave and tidal) is one of the obvious solutions to achieving this, given its abundance. It is essential, however, that appropriate measures are put in place to facilitate transporting the electricity generated from these resources to shore to enable the UK to harness their full potential. With the UK's offshore marine renewables programmes leading the world and helping maintain our ranking as the best place to invest in offshore wind, it's essential that we plan and co-ordinate the way we connect to the grid to maintain this position.

To date, offshore renewable projects have typically been connected to the transmission system on a point to point or so called "radial" basis. For single and often smaller scale projects, this is entirely appropriate with the transmission links being treated as though they are spurs to the main onshore transmission network. But, as the wind industry moves forward with the development of larger Round 3 scale projects, the need to optimise transmission design across entire offshore zones of projects means the current approach has reached the limits of its ability.

The Government and industry regulator Ofgem recognised this in broad terms when they published the conclusions of a year-long project on a co-ordinated approach to grid in March this year. Whilst not as headline grabbing as developments in offshore wind, this was, in its own way, a quiet revolution for the transmission sector. Their analysis identified that there could be up to £3.5bn of capital cost savings to be reaped from pursuing a more co-ordinated or integrated approach to developing the transmission system compared with the status quo. The findings showed these savings were largely achievable through developing shared transmission infrastructure which was deliberately over-sized to accommodate multiple windfarms, as well as through developing links between large offshore zones rather than reinforcing the transmission system onshore. The Energy Minister Charles Hendry was enthusiastic about the findings from this work and was quoted as saying "[this approach] could make some serious savings, so we would be crazy not to encourage it". The Crown Estate wholeheartedly supports this sentiment and the overall policy direction in this area. In an era when focus on costs is paramount, every effort should be made to pursue savings. This is especially necessary as government has set a target of £100/MWh for offshore wind to allow the sector to stand on its own feet in the competitive electricity generation market.

Capital cost savings on reduced infrastructure requirements may not be the only positive from pursuing a more integrated and holistic approach to transmission going forward. Work recently commissioned by The Crown Estate is investigating whether there are any large scale onshore network upgrades that could be avoided by taking a more co-ordinated approach to how offshore and onshore transmission integrates. This would not only save costs, but would remove the need for these network upgrades to be consented and then developed on land. Other benefits would include reducing the number of onshore landfall points for offshore cables. Further, a more co-ordinated approach should allow better optimisation of the seabed, which is ultimately a national resource for a range of activities, both commercial and leisure.

There are inevitable but not insurmountable challenges on the horizon to capturing these benefits. Foremost among these is the need to develop a fit-for-purpose regulatory environment which positively incentivises industry to pursue a co-ordinated approach. This ranges from putting in place a new charging structure which recognises the shared use of assets, as well as facilitating innovative ways for offshore wind to connect to the transmission system offshore - such as to interconnectors (which link the UK to mainland Europe), "bootstraps" and multi-purpose offshore hubs. Welcome steps have been made toenablebehaviours but if the benefits are to be fully realised, frameworks and institutions need further reform toencouragestakeholders to make the necessary investments which will deliver the overall policy direction.

Overall, the way in which generators connect to the grid will change as the number and scale of offshore renewable projects increases supporting the sustainable growth of the offshore industry beyond 2020. The Crown Estate believes that opportunities will also exist for other energy assets such as CCS networks and oil and gas platforms to take advantage of an offshore transmission network to source their power but that's another story…