Ofgem have published a consultation on the North West Coast Connections project's suitability for competitive tendering.
In our last CATO update, we summarised how Ofgem will identify which onshore transmission projects could be suitable to be put out to competitive tender, and the likely projects that could be tendered through the CATO mechanism. One of these is the North West Coast Connections (NWCC), a new 400kV double circuit connection to the main GB transmission network for a proposed new nuclear power plant in Moorside in Cumbria, with an estimated cost of £2.5 billion, making it likely to be the largest onshore electricity transmission project in GB's recent history.
Ofgem have now published a consultation on the NWCC's Initial Needs Case (which National Grid submitted in May 2016) and suitability for competitive tendering. It is open for comment until 24 February 2017 and Ofgem expect to publish their views on the responses in late spring 2017, including a statement on whether they intend to tender the project in whole or in part.
Competition assessment
Ofgem conclude that the project as a whole meets the new, separable and high value criteria for a CATO project, but have also looked at whether it could be split and re-packaged into sections and if so, whether each section still meets the criteria. They considered the project in three sections: (1) the North section, (2) the South section and (3) a tunnel section.
Ofgem also looked at deliverability, transferability and any other project specific considerations on the overall consumer benefits case. There are no issues with transferability.
Deliverability focuses on timing and the CATO's potential ability to deliver against project milestones. The timings are quite tight. Ofgem expect to be able to run the first CATO tender by mid-2018 and to have a CATO in place by mid-2020. NuGen's Moorside site needs site supplies in place by August 2021 (or possibly August 2022), so the North section of the project would need to be completed by then, with the other sections to be completed by the time the first reactor unit comes online in August 2025.
This only gives one year from CATO appointment until the August 2021 milestone date (assuming that does not slip) and five years from CATO appointment until first generation in August 2025. The tunnel section of the project involves building a tunnel under Morecambe Bay, which in itself is expected to take six to seven years. Ofgem have therefore concluded that a CATO should be able to build the South section in the time available, but that the North and tunnel sections may be challenging for a CATO to deliver on time. They are therefore considering whether to split and re-package the project further.
Comment
This project is still at an early stage, and the timings are not yet confirmed. The timetable for the first tender to be run will also depend on when the necessary CATO legislation is enacted, although for Ofgem's part they have already shown commitment to ensuring that the CATO legal framework is in place to support the NWCC project. It will be interesting to see the industry's views on Ofgem's assessment that at least some of this project could be tendered without impacting on NuGen's milestone dates.
