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Consultation for draft offshore wind energy regulations

Consultation for draft offshore wind energy regulations

Consultation for draft offshore wind energy regulations

21.04.2015 NL law

The draft Regulation on Offshore Wind Energy 2015 (Regeling windenergie op zee 2015) and the draft Implementation Regulation on the Offshore Wind Energy Act (Uitvoeringsregeling Wet windenergie op zee) were published on 2 April 2015. These two regulations provide details on the subsidy and permit grant for the construction and exploitation of offshore wind farms in the Netherlands. Comments on these draft regulations may be submitted until 30 April 2015. The main features of the regulations are set out below:

Regulation on Offshore Wind Energy 2015

This regulation outlines the conditions for eligibility for subsidy for the realisation of the first two sites of the Borssele wind farm zone (site I and II). The regulation includes among others the following provisions:

  • Subsidy applications can be submitted from the day after entry into force of the regulation until 5.00 p.m. on 31 March 2016. The regulation is expected to enter into force on 1 December 2015, unless the wind farm site decision (kavelbesluit) has not entered into force by then. If the regulation enters into force after 3 March 2016, then the closing date for submitting applications will be the fifth Thursday after the date the regulation entered into force.
    According to the Minister of Economic Affairs, the application period is sufficient since applicants should already be up to speed in view of this consultation and the timely publication of the regulation, and can therefore start preparing their bids in advance.
     
  • Each applicant can submit a maximum of three bids: one for site I, one for site II and one bundled application for both sites.
     
  • To be eligible for the subsidy, the nominal capacity for each site must be at least 351 MW reduced by the MW of the wind turbine with the lowest capacity in the relevant production installation, and must not be more than 380 MW.
     
  • The application for the subsidy will be rejected if the equity capital of the applicant is lower than 5% of the total investment costs. The equity capital must be demonstrated by furnishing the most recent annual report.
     
  • The subsidy applications will be ranked on the basis of the tender amount for each site. The applicant with the lowest tender amount per kWh will be ranked highest and will be granted the subsidy. If multiple applications are ranked highest, then selection will take place by drawing lots. There will be a separate ranking for each site. A bundled application is only eligible for subsidy if the tender amount for each of the sites equals or is lower than the tender amount of the highest ranked individual application for that site. If multiple bundled applications are ranked higher than the highest ranked individual bid, the ranking between these bundled applications will be decided on the basis of the average tender amount per kWh of the relevant bundled applications.
     
  • The regulation establishes a maximum tender amount, a base electricity price and a maximum number of full load hours (vollasturen), all of which, however, have not yet been provided in the draft. During the workshop hosted by the Netherlands Enterprise Agency (RVO) on 30 March 2015 it was indicated that a maximum tender amount of €123/MWh and a base electricity price of €29/MWh were being considered at the time.
     
  • The decision for the subsidy grant is made under the condition precedent that a bank guarantee of €5 million is provided within four weeks of the decision.
     
  • Another condition precedent to the subsidy grant decision is that a realisation agreement is concluded within two weeks of the decision, in accordance with the draft agreement attached to the regulation. This realisation agreement provides the following among others:
     
    • In addition to above-mentioned bank guarantee, a further bank guarantee of €25 million must be provided within 12 months of the subsidy grant decision.
    • A penalty arrangement is included in the realisation agreement, pursuant to which the developer incurs penalties if the wind farm does not become operational in time (see also below).
    • If the wind farm site decision is amended as a result of an appeal procedure, the developer may request to have the subsidy decision revoked without incurring a penalty.
    • The developer cannot derive rights from the research reports (i.e. the site data) made available by the State.
    • Commencing the construction before the wind farm site decision has become irrevocable is at the risk and expense of the developer.
  • The subsidy will be granted for a period of fifteen years. Given that a wind farm may be realised in phases, at the request of the subsidy recipient, different commencement days may apply for a maximum of five parts of the subsidy grant. If in a certain year less kWh is produced than the amount of kWh eligible for subsidy in that year, the difference in kWh may be added to the amount of kWh eligible for subsidy in the subsequent year. If in a certain year more kWh is produced than the amount of kWh eligible for subsidy in that year, the difference in kWh may be added to the amount of produced kWh in the subsequent year.
     
  • The subsidy recipient must have the wind farm operational within five years after the date of the subsidy decision. If the wind farm site decision becomes irrevocable after the date of the subsidy decision, the aforementioned term shall be five years after the wind farm site decision has become irrevocable.
    Notwithstanding the above, one of the criteria for the grant of the wind permit is that the wind farm can be operational within four years after the permit has become irrevocable. The extra one year is intended to provide some room for unforeseen circumstances in the actual realisation of the wind farm.
     
  • The regulation provides for several amendments to the General Implementation Regulation regarding the Stimulation of Sustainable Energy Production (Algemene uitvoeringsregeling stimulering duurzame energieproductie). The subsidy application must comply with the requirements of the draft regulation as well as aforementioned general implementation regulation. This general implementation regulation also contains (yearly) reporting obligations.

Implementation Regulation on the Offshore Wind Energy Act

This implementation regulation provides elaboration on several criteria that have been included in the draft Offshore Wind Energy Act in respect of the grant of the permit for the development of a wind farm.

  • In assessing the financial feasibility of the construction and exploitation of the wind farm, the equity capital of the applicant is taken into account.
     
  • In assessing whether construction of the wind farm can start within four years after the permit has become irrevocable, the detailed timetable of the applicant is taken into account. This timetable must contain the following benchmark dates: (i) the conclusion of contracts for the supply of components of the production installation, (ii) the commencement of the construction of the production installation, (iii) the commencement of the production of electricity, and (iv) the commencement date of the subsidy period.
     
  • The economic feasibility of the construction and exploitation of the wind farm is assessed based on the following to be provided by the applicant:
     
    • An exploitation calculation that contains at least: (i) a specification of the investment costs per component of the production installation, (ii) an overview of all costs and benefits of the production installation, and (iii) a calculation of the project return over the term of the subsidy.
    • A wind energy output calculation conducted by an independent organisation with expertise in the field of wind energy output calculations, using renowned calculation models, environment models, wind models and wind maps, and which contains at least: (i) the technical specifications of the intended wind turbines (brand, model, axis height, rotor blade diameter and capacity curve), and (ii) a calculation of the P50-value for the net electricity production of the wind farm on a yearly basis.

The draft Offshore Wind Energy Act further requires that construction and exploitation of the wind farm is feasible and technically achievable. The explanatory note to the draft regulation states that these criteria will not be elaborated on, as it is expected that the required bank guarantees will result in the submission of serious applications only.

For the avoidance of doubt, the permit will only be granted to the applicant that is granted the subsidy.

The explanatory note to the regulation further states that only the technical specifications of the intended wind turbines (brand, model, axis height and rotor blade diameter) have to be submitted with the application for the wind permit. Information about the location and the design of the turbines is only required at a later stage, prior to construction (pursuant to the relevant provision in the Water Decree, which has not yet entered into force).

Further, it appears from the draft regulation that no administrative charges will be levied for the permit grant. Other costs incurred by the State (e.g. for the research reports) will also not be passed on to the permit holder of the Borssele sites.

Conclusion

Another step towards facilitating an expedient roll-out of offshore wind farms in the Netherlands has been taken with the draft regulations discussed above. If you have any comments on these draft regulations, please submit your comments before 30 April 2015 through this website: https://www.internetconsultatie.nl/.

Finally, we wish to reiterate that the application period for the subsidy and permit for the Borssele wind farm sites will be between 4 weeks and 4 months, given that the State assumes that interested parties will have already taken note of all the information available to them on http://offshorewind.rvo.nl/ and should therefore be prepared for the upcoming tender.

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