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Ofgem invites views on OFTO tender process

By: Tom Russell 09/03/2018 Ofgem

General Substations Windfarms

The UK's Office of Gas and Electricity Markets (Ofgem) has opened a new consultation for process policy for future tenders for Offshore Transmission Owners (OFTO) for offshore wind farms.

In all of the OFTO tenders issued to date, the offshore wind farm developer has designed and built the offshore transmission assets before they are transferred to an OFTO, which will operate, maintain and decommission the transmission assets. This is referred to as the ‘generator build’ model.

The consultation sets out the outcome of Ofgems recent periodic review of its tender processes for appointing OFTOs and includes proposals for potential amendments to the process for future OFTO tender rounds.

Ofgem is considering two possible packages of options for change to the tender process that it expects will provide benefits to consumers.

The first being a moderate change package where Ofgem either retains the current arrangements at the Enhanced Pre-Qualification (EPQ) stage, or move to an approach where Ofgem no longer shortlists a maximum number of bidders before the Invitation to Tender (ITT) stage. Under the latter approach all bidders that met the threshold at the EPQ stage would be invited to progress to ITT.

At the ITT stage the bidder submitting the lowest price (i.e. Tender Revenue Stream, TRS) would be appointed Preferred Bidder (PB), so long as its bid met a threshold of robustness requirements.

The second package change would see Ofgem no longer shortlist a maximum number of bidders before the ITT stage, i.e. all bidders that met the threshold at EPQ stage would be invited to progress to ITT, however the ITT stage would be run later than currently, based on a more complete project data room, followed by a short confirmatory PB stage.

At the ITT stage bidders would be required to submit their proposed price (TRS) only, with the bidder submitting the lowest price being appointed PB. At the PB stage, to incentivise delivery of bids, bidders would be required to post a bid bond, potentially also supplemented by a pain/gain share mechanism.

The consultation closes on the 3rd May and following consideration of responses, Ofgem will provide further details on its proposed approach during summer 2018 in time for Tender Round 6.

Ofgem expects to commence TR6 in the autumn of 2018 and so will have built in the outcomes from this consultation by then. TR6 is to consist of three projects – Hornsea Project One, Beatrice and East Anglia One.

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Ofgem invites views on OFTO tender process

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