£52m of funding for the transmission link to the Walney 1 offshore wind farm will be provided by the European Investment Bank, the European Union's long-term lending institution. Blue Transmission Walney 1 Limited has been granted a licence to own and operate the offshore transmission link by Ofgem E-Serve, the UK energy regulator’s business unit focusing on environmental programmes and delivery of sustainability projects.
Blue Transmission are buying the link, as part of the licence grant process, from DONG, Scottish and Southern Energy and OPW for £105.4m, with £52 million of debt funding for the purchase being funded by the European Investment Bank (EIB). The EIB is providing this funding to support investment in offshore links as an essential part of the UK’s renewable energy infrastructure. The EIB is expecting to provide funding totalling £300m for six of the nine links to offshore wind farms from the first transitional tender round.
Blue Transmission was chosen by Ofgem E-Serve to take over ownership of the link from DONG Energy, Scottish and Southern Energy (SSE) and OPW, owners of the Walney I wind farm, following competitive tender under the Offshore Transmission Owner (OFTO) regime. This is the highest value project to have reached financial close so far in the first transitional tender round of the offshore regime. Blue Transmission will be able to operate the link to the 51-turbine wind farm in the Irish Sea for 20 years.
Simon Brooks, European Investment Bank Vice-President for the UK, said “Operation of the Walney transmission link will help reduce the overall cost of energy produced by offshore wind. Support for renewable energy across Europe, including grid links and windfarms, is essential for ensuring infrastructure investment that promotes climate action.”
Ofgem Chairman, Lord Mogg, said: “The OFTO regime has already attracted more than £250m investment from both the EIB and other new commercial and funding entrants. The EIB’s involvement is one of the key factors that made the first tender round a success. It demonstrates confidence that the regime can deliver good investment opportunities while lowering the cost to developers and customers of bringing power ashore.”
The OFTO licence for Walney 1 is the first granted to the Blue Transmission consortium, and the fourth OFTO licence granted this year. Other OFTO licences are for ownership of links to the Barrow, Gunfleet Sands and Robin Rigg wind farms.
All four were part of the first transitional tender round, which comprises £1.1 billion of offshore transmission links to nine offshore wind farms. The tender round attracted almost £4 billion of investment appetite and Ofgem E-Serve expects to conclude the grant of licences for the other links in the first round as they become operational over the coming year.
The second transitional tender round has four short-listed bidders competing for the first three projects to link another 1.4 GW of offshore wind farms with a total value of £1 billon.
Notes for Editors
- The European Investment Bank (EIB) is owned by the 27 Member States of the European Union, and provides long-term debt financing for projects that further EU economic policies. It has been active in the UK since 1973, supporting investment ranging from motorways and rail, to water supply and treatment, energy schemes, hospitals, universities, high-tech development in industry, as well as small and medium-sized businesses. In the last five years (2006-2010) it channelled over £17 billion into projects in the UK, including over £4 billion last year.
- The European Investment Bank is expected to provide £300m of finance for six of the nine links to offshore wind farms from the first transitional tender round.
- Ofgem E-Serve was created in September 2009 as a new business unit focusing on delivery of Government environmental programmes and the delivery of sustainability projects such as offshore transmission. The regulatory functions of Ofgem, such as setting network price controls and monitoring the markets, continue under separate business units within the Ofgem Group.
- The offshore regulatory regime was developed by Government and Ofgem and launched in 2009. The regime is for licensing offshore electricity transmission and uses competitive tendering to ensure the cable connections are delivered on time and at a reasonable cost. It is the first time that Ofgem has used competitive tendering in this way. The first phase of the project involves two transitional tender rounds and opens the way for transmission licensees to own and operate transmission assets for offshore renewable projects which have been or are being constructed by the offshore generator.