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UK Energy Regulator Ofgem Approves Early Construction Funding for Scottish Power Transmission

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UK energy regulator Ofgem has approved 'early construction funding' for several large power transmission projects in Scotland, it said on Tuesday, a step which will help tackle lack of grid capacity to deliver surging volumes of wind power.

Interestingly, the Ofgem press release noted that the approval will help ensure that scarce substation components and HVDC cables can be sourced amid a "global race to secure key components" as many countries pursue decarbonization goals.

Procurement delays that arise when such components are not immediately available can significantly increase project costs, Ofgem said.

The approval is not an agreement to provide funding, but rather a step that includes the projects in a regulated remuneration framework that outlines future permitted revenues for investors in the projects to recoup their capital.

The grid expansion itself will also help the UK unlock more value from its renewable energy investments by reducing curtailment or the disconnecting of renewable power due to lack of grid capacity to carry it to populous or industrial areas that can absorb it.

The cost of compensating wind farm owners during such events is ultimately added to consumer power bills.

Ofgem said that the projects should start delivering benefits to consumers by 2030 if the investments are executed to schedule.

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