The regulatory framework for the EU integration of offshore wind Siobhán Carty, Ofgem

1. The regulatory framework for the EU integration of offshore windSiobhán Carty, Ofgem Wednesday 16 September 2009, 11.00-12.30

2. Agenda • Legislative context • Impact on regulatory regime for wind • Great Britain’s offshore regime • Challenges in developing an offshore grid • What are we doing to meet the challenge?

3. Competitive markets EU energy markets Sustainability Security of Supply Legislative context – impact on regulatory regime for wind…? • Third package • Green package • 2nd Strategic Energy Review Changes made at EU will have an important impact for the regulatory regime for wind, especially off-shore wind.…

4. For the future – pan-European offshore wind farms…? • North-Sea offshore grid • interconnect national electricity grids in North-West Europe together Source: www.scotland.gov.uk Such projects will play an important role. However, certain issues will need consideration by regulators and market players for them to work.

5. Onshore TO Offshore Transmission Owner (OFTO) Great Britain’s offshore transmission regime (1) • Key enabler of offshore wind and 2020 targets. • “OFTO” will be awarded licence that guarantees a 20 year revenue stream. It will design, finance, construct, own and manage offshore transmission assets. Generator Connection to onshore network Onshore Substation Offshore Platform 132 kV Cable 33 kV Inter Array Cables

6. Great Britain’s offshore transmission regime (2) • Key benefits of the regime • For Generators • Delivers cheaper and more timely offshore grid connections • Focused on generator’s requirements • Flexibility for future offshore generation needs • For OFTOs • Encourage innovation through competition and enable new entrants to compete in the market • Long term regulatory certainty and light-handed regulation • Low risk – OFTO protected against generator failure and credit risk

7. Great Britain’s offshore transmission regime (3) - Facilitates the development of offshore networks • Towards an integrated network • Scope to have more than one onshore connection point; and • Allows for interconnection of platforms – organic development towards an integrated offshore network. • Point-to-point connections • Generator-specific connections Tender stages for enduring regime expected to commence in 2011 – some further consultation expected.

8. Challenges in developing offshore grids (1) • Differing support schemes for renewables; and • Different regulatory grid treatment across Member States, for • Connection; • Charges; and • Grid reinforcement. This may influence the incentives wind generators have on where to locate – this is especially relevant to offshore grid projects.

9. Challenges in developing offshore grids (2) • Current market arrangements may not best facilitate wind deployment • Long gate-closure times; and • Penalties for imbalance. Harmonisation across the EU is not necessarily the answer – shorter gate-closure times is important for wind.

10. Challenges in developing off-shore grids (3) - conclusions • Different regimes is not necessarily a problem. • However, where arrangements represent barrier, then consideration needs to be given to their effectiveness.

11. What are we doing to address the challenges? • As Ofgem, • GB offshore transmission regime; • “Project Discovery” – review of the medium term outlook for GB’s security of supply. • As part of CEER/ERGEG • Development of the new European network codes for the 3rd package; • Input into the Regional Initiatives; and • The EU Agency.

12. Questions? Comments? Siobhán Carty, Regulatory Economist, OFGEM, Tel +44 20 7901 7112 siobhan.carty@ofgem.gov.uk