Supply chain constraints push back UK’s $3B subsea electricity superhighway by 16 months

UK energy market regulator Ofgem is considering whether to grant a penalty exemption for the joint venture (JV) developing the Eastern Green Link 1 (EGL1) subsea electricity superhighway due to a 16-month delay said to be caused by supply chain constraints.

The 2 GW EGL1 HVDC multi-directional cable is being developed by National Grid Electricity Transmission (NGET) and SP Transmission, part of SP Energy Networks, between the Torness area in East Lothian, Scotland, and Hawthorn Pit in County Durham, England, set to transport green electricity for two million homes along over 190 kilometers of predominantly undersea cable.

Ofgem announced that the JV had requested a 480-day Penalty Exemption Period (PEP) for the project due to a delay, citing “unavailability of equipment or capacity globally in supply chain”, one of the examples of an event that may qualify as a Delay Event, as listed in the Accelerated Strategic Transmission Investment (ASTI) Guidance and Submission Requirements Document.

The ASTI framework, introduced in 2022 to expedite the delivery of 26 key electricity transmission projects and put in place to support the goal of connecting 50 GW of offshore wind by 2030, includes an Output Delivery Incentive (ODI), which provides a financial reward to transmission owners for timely project completion and penalises delays.

The penalties and rewards are applied at a daily rate, based on the forecasted consumer impact of project delays. Transmission owners can apply for a modification to the ASTI ODI PEP in case of a Delay Event, i.e. an event that causes, or is reasonably expected to cause, one or more ASTI projects to be delayed by at least 30 days, which is outside the transmission owner’s reasonable control and is not attributable to any error or failure on the licensee’s part.

EGL1 is expected to be delivered in April 2029, 16 months later than required, which would result in four months of ODI penalties for the JV.

The partners attribute the delay to market conditions, supplier withdrawals, and a delayed final offer from an unnamed supplier, asserting they took all reasonable steps to secure the supply chain given the challenging circumstances.

Ofgem is now consulting on rejecting the application, saying that, based on the provided evidence, it does not believe that the requirements for the approval as set out in the Electricity Transmission licence Special Conditions and the ASTI Guidance and Submission Requirements Document have been met.

The UK regulator noted it accepts that supply chain conditions were challenging, but considers that the applicable supply chain constraints were not “global” as there was no unavailability of equipment or capacity globally in the supply chain at the time of the EGL1 tender, not “outside the transmission owner’s reasonable control” as stakeholders were aware of supply chain constraints in 2022, thus the JV had sufficient notice to take steps to mitigate these constraints, and not the cause of the delay, which instead may have been attributable to an “error or failure on the licensee’s part” as a result of its procurement strategy.

The consultation is open until May 2 on whether to grant the ASTI ODI penalty exemption, with responses from electricity transmission owners, other stakeholders and the public welcome.

The £2.5 billion (over $3.1 billion) project was given the green light by Ofgem last year, with onshore works currently underway and offshore construction due to start in the summer.

Prysmian won a €850 million contract to deliver the 525 kV HVDC XLPE submarine cable system for the 190-kilometer route between England and Scotland, while the consortium of GE Vernova’s Grid Solutions business and METLEN Energy and Metals secured a contract worth around €1.2 billion to deliver the HVDC converter stations.

A total of four EGL links form part of planned electricity grid reinforcements to boost the capability of the existing UK transmission network and facilitate increased flows of planned renewable generation in the North to demand centers to the South, supporting the ambition of enabling 50 GW of offshore wind generation by 2030 and achieving a net-zero economy by 2050.

Construction on Eastern Green Link 2 (EGL2) started in September 2024.