New Benchmarks for ASTI Cost Assessment

Ofgem require support to develop new benchmarked ranges for employee and employer indirect construction costs and risk to inform future Accelerated Strategic Transmission Investment (ASTI) cost assessment. ASTI involves the assessment of 100m+ complex onshore transmission schemes that are deemed essential to achieving the Government's target of connecting an additional 50GW of wind by 2030. There are c. 26 projects to be reviewed over the next two to three years.

Implementing ASTI therefore necessitates completing project cost assessments much more quickly than under current processes which can take between 9 and 12 months. ASTI reviews will need to be completed within 4 months. To achieve this, Ofgem's tools and methodologies need to become more mechanistic and top-down; assessing estimates against relevant and up to date benchmarks to identify any costs that are outside recognised normal ranges and require further investigation.

The past 18 months have seen dramatic changes to the infrastructure project environment, with soaring demand, significant cost increases, elongated programmes and supply chain constraints. The appetite and ability to manage risk has also changed dramatically. As a result many of Ofgem's existing benchmarks no longer reflect the actual profile of market-tested project costs; updated benchmarks are therefore required.

The emphasis of Ofgem's benchmarks also needs to change. As Ofgem is seeking to implement an accelerated, more targeted ...ut risk or inflation, or indirect categories vs. total direct costs).

Benchmarks can be taken from actual costs on completed UK transmission infrastructure projects, European transmission infrastructure projects and general UK construction sector where the projects are considered of a comparable scope, value and complexity to those Ofgem will be assessing under ASTI.

Specifically, Ofgem requires support to:

• To co-ordinate engagement with the TOs to agree definitions for direct and indirect cost categories
• To define and agree definitions for best practice, average and poor in relation to indirect cost categories vs. direct and anticipated final cost
• To secure actual project cost data from UK Transmission Owners, UK construction sector and European Transmission Owners, utilising own databases wherever possible
• Develop new benchmarked ranges for best practice, good, average and poor for indirect cost categories
• Develop a spreadsheet tool to allow for quick comparison of estimated costs and their position relative to the new benchmarked ranges. A template model will be shared to assist with this process.

As well as the above, other areas that Ofgem may look to consider and require further support on if time and funding allow includes:

• A suite of standard direct cost unit rates for transmission infrastructure projects
• A cost driver function to tailor ranges to High Voltage Alternating Current (HVAC) vs. High Voltage Direct Current (HVDC) projects