363. There is a significant capital cost of building new offshore transmission infrastructure and/or investment needed to retrofit existing infrastructure so that it can run on electricity. The financial incentive to electrify is not present as businesses often do not account for wider societal benefits that their spending will bring. Similarly, operational costs act as a barrier to electrification, making schemes unattractive or uneconomical.
364. Lack of regulatory clarity is another challenge. Clarity on consenting pathways is needed to facilitate electrification of offshore infrastructure. Industry has said that the regulatory regime for platform electrification is currently too complex, with developers requiring different approvals from a range of regulators, slowing down deployment and making it hard to get electrification off the ground. For example, electrification projects in the Central North Sea wanting to use a single offshore wind turbine to supply renewable power to Floating Production and Storage Offshore (FPSO), face a lack of clarity in two areas. Firstly, on consent for the wind turbines, it falls across the Marine Scotland and Crown Estate Scotland jurisdictions, and outside of Innovation for Targeted Oil and Gas leasing areas. Secondly, there are questions over how CfD rules will apply to the floating offshore wind, for example whether the proportion of wind power fed to shore can remain eligible for CfDs with proportion to oil and gas.
365. Access to grid connections is a huge challenge for the sector, given potential grid reinforcement requirements and/or competition from other industries to access the onshore grid. Generation connections improve the economics of otherwise significantly negative net present value of electrification projects by allowing power from a windfarm (typically over-sized beyond oil and gas operators' needs) to be exported to the grid.