Smoke, Mirrors and Peacock Tails: Why the Sudden Surge in Connection Agreements?
It’s an excel spreadsheet called the TEC Register and for most people it’s probably one of the most boring documents in the world. It’s a list of power stations and wind farms – hundreds of them. Some are real, others are under construction, or searching for finance to get built, or fighting to get planning permission. Some, as we shall see, are mere tricks of the light.
The TEC Register may be boring, but you can’t beat it on price – you can download it for free from the Electricity System Operator (ESO) part of National Grid, who scrupulously update it every few days. That’s because the TEC Register is an exhaustive list of every project that has a contract with ESO for grid connection. For people like me who have a fascination with the power system – the sort of fascination that others apply to football teams – the TEC Register is like a gossip column: who’s plotting to do what and where. And over the last few months we’ve noticed some odd offshore wind farms appearing in it.
To understand what we’ve seen, and why it’s odd, I’ll first explain a bit about offshore wind farms. You can’t just build them where you want to. You’ll need to get planning consents of course, but even before you do that you’ll need to get a lease from the owner of the seabed. Traditionally the view was that everything needed to start with a lease – if you wanted to build a wind farm but didn’t have a lease then there was no point going any further.
And that’s why us TEC-Register-watchers were puzzled. It’s been well over a decade since any new leases have been granted in Scotland for large offshore wind projects, but in the last few months ESO has been signing numerous new connection agreements with wind farm projects that don’t have leases. There’s a veritable zoo of such projects: 13 when I last counted. The naming of these projects ranges from the vague (“North East Offshore Wind Farm”) to the ultra-vague (“OSP02”) to the downright obscure (“Belzona” and “Lyra”).
What is going on?
The first part of the answer is easy. For the first time in more than a decade new leases for Scottish seabed are being issued to offshore wind farm developers – and the sudden profusion of new connection agreements is being driven by companies that want to get one of the new leases. In fact when the Crown Estate in London was issuing new leases south of the border a few months ago we saw the same behaviour, complete with some similarly mysterious project names, such as “New Project One”).
It’s also clear that the scale of all these new connection agreements has got a bit out of hand: when you add up their capacity it comes to more than double the amount of capacity that these projects are allowed under Scotland’s Marine Plan. It’s clear that there must be multiple connection applications by different companies on behalf of the same bit of seabed.
But why pay for a connection agreement at all if someone else can be awarded the site you were hoping for? Why not wait until you have the site and then apply?
What makes it even stranger is that ESO, Ofgem and BEIS are all supposed to be working towards “co-ordinated” connections for offshore wind, with a “holistic network design”. The future is supposed to be about planning and analysis and logic and order – not a disordered mob trying to grab what they can like some black-Friday riot. With this in mind ESO has even brought in new rules: all of the weird and wonderful names we find in the TEC Register only have “placeholder” connection agreements, issued with minimal study. If the developer fails to lease the piece of seabed that they were hankering after then the connection agreement will be terminated. But even if they succeed, they won’t have their placeholder agreement upgraded to the real thing until 2022. ESO has also got the bidders together on 3rd June and told them – amongst other things – that there is no need to put in a connection application until they’ve leased a site for their wind farm, as it will not accelerate their developments in any way.
So what explains the deluge of new connection agreements revealed in the TEC Register? Why is it happening when the rules are designed to stop, or at least not encourage, that sort of behaviour? And why is it happening now when nothing similar happened the last time that Scottish seabed leases were handed out to wind farm developers?
The answer, as ever, is money. Back when seabed leases were last awarded, more than a decade ago, offshore wind was seen as an interesting but risky business. Everyone expected the industry to be dependent on government subsidies forever, so there was a huge risk that – after a developer had spent tens of millions on the engineering and consenting of a project – the government wouldn’t fork out the subsidies and it would all have to be written off. Today it’s completely different: companies from around the world are desperate to put money into offshore wind farms; compared to the amounts of money at stake, the fee for a connection agreement is negligible; and when there is huge pressure on people to “do something” – well, getting a connection agreement is doing something. Not just that, it’s something that has traditionally been associated with a project making good progress – and many people don’t know that ESO’s new rules mean that it’s all meaningless.
So there you go, the sudden flowering of more than a dozen imaginatively-named connection agreements turns out to be offshore wind’s version of the peacock’s tail – designed to impress, but not actually any use for anything.