Ofgem has launched what is expected to be its largest-ever tender round for the offshore transmission assets connecting Hornsea 3 offshore wind farm, one of the world's biggest wind farms, to Britain's power grid. Tender Round 14 in Ofgem's OFTO framework, which launched on Wednesday 21 October, has an estimated value of around USD 4.69 billion.

Under the tender, investors will compete to own and operate the transmission assets for Hornsea 3, one of the world's largest offshore wind farms currently under construction. The 14th Offshore Transmission Owner regime tender round marks a significant step in the competitive allocation of offshore grid infrastructure.
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A Major North Sea Project

Hornsea 3 is located over 100 kilometers offshore in the North Sea. The project is due for completion by the end of 2027 and is projected to be able to power 3.3 million UK homes. The transmission assets at the center of the tender include cables and offshore and onshore substations that link the wind farm to the onshore grid.

Beatrice Filkin, Ofgem's Director of Major Projects, said, "Hornsea 3 is one of the world's biggest wind farms. The offshore connection linking it to the onshore grid will help deliver home-grown energy to millions of British consumers as well as providing a great long-term opportunity for investors."

She added: "By running a competitive process, Ofgem is helping attract the investment Britain needs for a cleaner, more secure energy system while making sure consumers get value for money. We'd encourage any would-be investors interested in finding out more about this major opportunity to get in touch and learn more about the process."

How the OFTO Regime Works

Under the OFTO regime, successful bidders receive a long-term, inflation-linked revenue stream for financing, operating and maintaining prebuilt transmission assets. Successful bidders receive an inflation-linked revenue stream for up to 25 years, subject to asset availability and performance.

Ofgem runs the competitive tendering process through tender rounds. Within a tender round, Ofgem assesses bids and grants offshore transmission licenses to bidders for specific transmission assets connected to offshore wind farms around Great Britain. The transmission assets are sold in parallel from the developer to the successful bidder.

The competitive tender process is designed to keep costs down for consumers and maintain high standards of performance. According to Ofgem, the OFTO regime underpins the government's renewable energy targets by connecting homegrown offshore wind generation at the lowest cost to consumers, ensuring that offshore wind generators are partnered with the most efficient and competitive transmission owners in the market. This, Ofgem states, means lower costs and high standards of service for generators and, ultimately, consumers.

Track Record since 2009

Since its launch in 2009, the OFTO regime has seen winning bidders invest over USD 13.39 billion in links connecting 28 offshore wind farms. The USD 4.69 billion estimated value of the Hornsea 3 tender round makes it the largest since the framework began.

Ofgem anticipates more North Sea offshore transmission assets to come to market through the OFTO framework in the future.

Part of a Wider Energy System Modernization

The OFTO framework forms a key element of what Ofgem describes as a once-in-a-generation modernisation of Great Britain's energy system. It helps deliver clean electricity to homes and businesses and to meet growing demand from transport, heating, industry and data centers.

The regime also strengthens energy security by making greater use of Britain's renewable resources and reducing exposure to volatile global gas markets. Ofgem positions the competitive process as a means of attracting the investment needed for a cleaner, more secure energy system while ensuring value for money for consumers.

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