Denmark

Danish chapter: January 2017

This chapter has been contributed by Bech-Bruun, Denmark's largest law firm with a strong and highly specialized practice within offshore wind. 

1. Introduction

Since the oil crisis in the early 1970s the Danish energy system has become increasingly more reliant on renewable energy sources. From 2008 to 2014, the total generation from central power stations (coal and gas) and local combined heat and power has declined from 80% to 55%. In the same period, the proportion of wind power in total electricity generation has increased from 20% to around 43%. In the EU in 2014, Denmark had by far the highest share of wind power in its gross final electricity consumption.1See Danish Ministry for Energy, Utilities and Climate’s press release of 13 May 2016 which refer to Eurostat statistics (in Danish): http://www.efkm.dk/nyheder/regeringen-skabe-vaekst-ved-saenke-elregningen.

For the electricity sector, the intermediate objective is to supply approx. 50% of the electricity consumption by wind power by the year 2020.2 See Baseline Projection 2015, published by the DEA (in Danish): https://ens.dk/sites/ens.dk/files/Basisfremskrivning/dk_energi_klimafremskrivning_2015.pdf.This target is defined in a broad political agreement of 22 March 2012 on Danish energy policy for the years 2012-2020 (“Energy Agreement 2012”).3The Energy Agreement 2012 was supported by 95% of the members of the Danish Parliament in 2012.

Denmark is a pioneer of the development of offshore wind power, and currently has the world’s longest experience with tenders for offshore wind power. The world's first offshore wind farm was established in 1991 off the coast of Vindeby in Danish waters. Today, 13 offshore wind farms have been established in Denmark, see table below.

Offshore wind farm

Established

Turbines

Capacity

Vindeby

1991

11

4.95 MW

Tunø Knob

1995

10

5 MW

Middelgrunden

2000

20

40 MW

Horns Rev I

2002

80

160 MW

Rønland

2003

8

17.2 MW

Nysted

2003

72

165.6 MW

Samsø

2003

10

23 MW

Frederikshavn

2003

3

7.6 MW

Horns Rev II

2009

91

209 MW

Avedøre Holme

2009/10

3

10.8 MW

Sprogø

2009

7

21 MW

Rødsand II

2010

90

207 MW

Anholt

2013

111

399.6 MW

Source: Danish Energy Agency, www.ens.dk.

Thus, the total Danish capacity of offshore wind farms is 1,271 MW. Ongoing offshore wind farm projects are further expected to add more than 1,000 MW by 2021.4See White paper “Wind energy moving ahead – How Denmark utilises wind in the energy sector”, October 2015, available on www.stateofgreen.com.

Currently, there are six ongoing offshore wind farm projects: Nissum Bredning experimental wind farm (28 MW); Jammerland Bugt (120–240 MW); Omø Syd (200–320 MW); Horns Rev 3 (400 MW); Kriegers Flak (600 MW); and two near shore wind farms Vesterhav Syd and Vesterhav Nord, respectively (350 MW).

As there is currently no prospect of new near shore tenders coming up, this chapter will not elaborate further on near shore wind farms.

2. Permit

2.1. General

Under the Danish RE Act5Consolidated Act no. 122 of 6 February 2015 on the Promotion of Renewable Energy, as subsequently amended. the Danish State may grant rights of use and access to private parties in order to exploit energy from the wind in Danish territorial waters and in the exclusive economic zone (EEZ). The construction and operation of offshore wind farms is mainly regulated within the framework of the RE Act.

There are two different procedures for obtaining permits for construction and operation of offshore wind farms in Denmark: tenders announced by the State, and the so-called open door procedure.

Under the tender procedure, the Danish State invites tenders for an offshore wind farm in a designated location and with a specified capacity, as a concession. Under the open door procedure, a licence application is submitted on the project developer’s own initiative, who also determines the location and capacity of the offshore wind farm.

The permitting process is carried out through a one-stop-shop approach, in which the Danish Energy Agency (DEA) grants the key licences, and coordinates with other relevant public authorities.6It follows from a recent amendment to the RE Act that the Minister for Energy, Utilities and Climate intends to revoke the delegation to the DEA to grant pre-investigation licences, see also section 2.3. The authority to issue such licence will be with the minister. At the time of writing, the delegation has not been revoked. It is therefore not yet specified whether the amendment will affect the tender procedure for offshore wind farms.

Under both the tender procedure and the open door procedure, the permitting process consists of the following four key licences for construction and operation of offshore wind farms:

  1. licence to conduct pre-investigations
  2. licence to construct the wind farm
  3. licence to exploit the wind power from the wind farm
  4. authorisation to produce electricity.

The pre-investigation, construction, and electricity production licences are governed by the RE Act. The electricity production authorisation is governed by the Danish Electricity Supply Act.7Consolidated Act no. 418 of 25 April 2016 on Electricity Supply, as subsequently amended. The licences are issued as the project proceeds.

Pre-investigation licence

The pre-investigation licence entitles the licensee to carry out investigations related to the construction of the offshore wind farm within the limits of the licence. The requirements for obtaining a pre-investigation licence differ for the tender procedure and the open door-procedure and are elaborated below in sections 2.3 and 2.4. The licensee has no explicit obligation to carry out the pre-investigations, but the licence will lapse if pre-investigations are not carried out within a certain time limit set out in the licence.

The pre-investigation licence will typically be valid for one year after which an environmental impact assessment (EIA) report is to be submitted to the DEA for approval. Based on the EIA report, the DEA will decide whether a full impact assessment is required. If a project individually, or in combination with other plans or projects, has potential impact on designated international nature reserves (habitat sites, special bird protection sites and Ramsar areas), a full impact assessment is required.8See s 27 of the RE Act and s 2, cf. s 1(2) of Executive Order no. 1476 of 13 December 2010 on environmental impact assessments regarding international nature conservation sites and protection of certain species in connection with projects on the establishment etc. of offshore electricity production plants and electricity supply grids. The impact assessment can be included in the EIA report provided that a clear distinction is made between the report and the impact assessment.9See s 3(2) of Executive Order no. 1476 of 13 December 2010. The DEA will, in its capacity as EIA authority for the offshore installations, submit the EIA report for consultation with other authorities before deciding on approval of the report.

Construction licence

The construction licence grants the licensee the right to construct a wind farm at a certain location, and will include terms concerning the design and appearance of the foundations, towers, and wind turbines, as well as requirements for the overall construction process. This licence is issued to applicants who are entitled to make use of a pre-investigation licence, and are deemed to have the necessary technical and financial capacity to establish the wind farm. The construction licence will expire upon issue of the electricity production licence.

Electricity production licence

The electricity production licence grants the licensee the right to exploit the wind and produce electricity from the wind. The electricity production licence is issued if the applicant documents compliance with the terms and conditions of the construction licence. The licensee must at all times have the required technical and economic capacity to operate the wind farm. The licence is generally granted for 25 years from the date of grid connection (i.e. the time of delivery of the first kWh to the collective electricity supply grid) with the possibility of applying for an extension beyond this 25-year period.

Electricity production authorisation

An electricity production authorisation is required for operating power plants with a capacity exceeding 25 MW. The authorisation is issued if the applicant documents having the necessary technical and financial capacity to operate large power plants. Pursuant to the Electricity Supply Act further conditions may be imposed by the DEA.

Generally, any direct or indirect transfer of the rights and obligations under the above-mentioned licences as well as the electricity production authorisation requires the consent of the DEA, which may be withheld by the DEA for objective reasons.

Objections against the award of the licences or the authorisation may be filed to the Danish Energy Board of Appeal within four weeks from the issuance of the relevant licences/authorisation. Unless decided otherwise by the Energy Board of Appeal, appeals do not have suspensory effect.

2.3. Open door procedure

The open door procedure is an administrative process following which the DEA issues the key licences, provided that the applicant fulfills the legal requirements. There is no element of competition under this procedure.

The DEA enjoys discretionary power in relation to pre-investigation licence applications under the open door procedure, taking into consideration the applicant’s financial and technical capacity and the site’s relevance for exploitation of energy. In its assessment of the relevance of the site, the DEA can include a broad set of criteria, including general planning considerations and rules on the minimum distance from the coast. The pre-investigation licence will not be granted if it is clear that the construction of the prospective wind farm is ruled out due to environmental reasons (e.g. due to the impact on protected areas), safety reasons, maritime traffic, fisheries etc.

The DEA has indicated that it aims to apply stricter conditions for the progress of projects under the open door procedure.10See https://ens.dk/ansvarsomraader/vindenergi/aaben-doer-ordningen-havvindmoeller/information-projektudviklere-om-aaben (in Danish). This entails that the DEA will lay down milestones for each step in the application process, with specific deadlines for the processing of pre-investigation licence applications by the DEA and until the construction licence is applied for. For instance, applicants must submit to the DEA any supplementary information requested by the DEA during the processing of pre-investigation licence applications within four weeks from the request, and applicants must submit an application for a construction licence within six months after the DEA’s approval of the pre-investigation report. These stricter progress conditions will apply to existing as well as new pre-investigation licence applications. The DEA may extend the deadlines if there are special circumstances relating to the application.

Pursuant to the RE Act owners of offshore wind farms located less than 16 kilometers from the coast line are obliged to offer 20% of the ownership shares in the wind farms to local citizens with residence within a distance of 4.5 km from the wind farm’s location, or with residence in a municipality having coastlines within 16 km from the location of the wind farm (referred to as the “option to purchase” scheme). From 1 January 2017, the option to purchase scheme will also apply to owners of holiday homes which generally meet the same conditions as local residents. The purchase options must be offered after issuance of the construction licence, but prior to the grid connection of the wind farm.

In addition, pursuant to the so-called depreciation scheme under the RE Act, owners of wind farms are obliged to compensate depreciation on residential property caused by wind farms, provided that such depreciation exceeds 1% of the property value. In order to inform eligible local citizens about this scheme, the project developer and Danish transmission system operator (TSO) Energinet.dk are required to organise a public meeting. Claims under the scheme will be assessed by Energinet.dk and must be submitted within eight weeks of the public meeting.

As from 1 January 2017 the RE Act entitles local municipalities to object to the issuance of a pre-investigation licence for a wind farm that will be located within 8 km of the coastline. If a municipality objects pursuant to these new rules, the matter will be put before the Energy, Utilities and Climate Committee of the Danish Parliament for review, before the Minister for Energy, Utilities and Climate makes the final decision whether to issue the licence. An objection from a municipality will therefore not automatically result in the application being rejected if the minister, based on certain considerations specified in the RE Act such as security of supply, finds that there is a basis for issuing the pre-investigation licence.

2.4. Tender procedure

Tenders for large-scale offshore wind farms find their basis in the Danish Parliament's political agreements. The tenders are announced in the Supplement to the Official Journal of the European Union.11http://ted.europa.eu/TED/main/HomePage.do Tender invitations are issued by the DEA on behalf of the Danish State. It is also the DEA that lays down the tender specifications after having presented them to the Energy, Utilities and Climate Committee of the Danish Parliament.12A list of certifying companies accredited to issue project certifications can be found at the website of the DEA’s secretariat for the Danish Wind Turbine Certification Scheme: http://www.vindmoellegodkendelse.dk/certificering/certificerende-virksomheder/.

In order to be considered for pre-qualification in the tenders, applicants must meet the minimum requirements regarding economic, financial, and technical capacity, as stated in the specific contact notice published in the Supplement to the Official Journal of the European Union. The assessment of the applicant's economic and financial capacity considers, inter alia, the applicant’s overall turnover, total equity or credit rating, its full annual report and audited accounts. In order to fulfil the technical capacity requirement, the applicant must – itself or through, for example, declarations of support – possess experience with project development and management of the construction of offshore wind farms.

Before bid submission, pre-investigations are carried out by Energinet.dk, by an order issued by the Minister for Energy, Utilities and Climate. Thus, a fully consented EIA is in place before the final bids are submitted. This aims is to allow tenderers to submit qualified and competitive offers. The costs incurred by Energinet.dk for pre-investigations and preparation of the EIA are borne by the winner of the tender.

The winner of the tender is awarded a concession to construct and operate the tendered offshore wind farm. The concession is awarded on the basis of the award criterion “the lowest price”, and reflects the minimum need for subsidies (see section 3 below). Unlike the open door procedure, where no concession agreement is concluded, the tender procedure is concluded by the DEA and the winning tenderer entering into a concession agreement. In previous completed tenders, the concession agreements contained detailed terms and conditions in relation to, inter alia, the key licences, the subsidy regime, grid connection, defective performance, decommissioning, transfer of the concession, liability, and compensation for delayed grid connection.

Under the RE Act, the concessionaire may be subject to a penalty for defective performance if the concessionaire, for whatever reason, fails to construct and connect the offshore wind farm in accordance with the terms of the concession agreement.

In the concession agreement and/or the key licences, the DEA usually requires that the concessionaire provides certain guarantees, including a guarantee for payment of a penalty for defective performance and a guarantee for dismantling and decommissioning the wind farm pursuant to the terms and conditions of the construction licence and the electricity production authorisation.

Due to the nature of the tender procedure, the concession award may be subject to objections with the Danish Complaints Board for Public Procurement. Objections must be lodged within a period of 45 calendar days, starting from the day after the publication of the award notice in the Supplement to the Official Journal of the European Union.

After entering into the concession agreement, the concessionaire is granted a pre-investigation licence and a construction licence. The concessionaire will have to apply for an electricity production licence and an electricity production authorisation upon commencement of construction, and do so no later than two months before the first wind turbine supplies the first kWh to the collective electricity supply grid.

2.5. Certification of wind turbines

Offshore wind farms are subject to technical certification of the wind turbines pursuant to the Danish Executive Order no. 73 of 25 January 2013 on a technical certification scheme for wind turbines. Pursuant to this certification scheme, the turbine producer is responsible for obtaining a type or prototype turbine certification from a certifying company accredited under the Executive Order. The period of validity of such certification varies according to the type of certification.

In addition, turbines with a swept area exceeding 200 m2 must, upon installation, be certified as a project in accordance with European standard DS/EN 61400-22, including specified DS/EN, IEC and ISO standards. Project certification must be applied for by the project owner and is issued by a DEA-approved certifying company in relation to a specified location and design. Project certification is valid for the entire design lifetime of the turbines.13See http://www.vindmoellegodkendelse.dk/om-ordningen/teknisk-grundlag/ (in Danish).

3. Subsidy

3.1. General

Historically, subsidies granted by the Danish State have been essential to the development of wind power in Denmark. Danish support to renewable energy (RE support) is currently financed through the so-called PSO (Public Service Obligation) tariff. This includes financing of subsidies for electricity produced at offshore wind farms, whether tendered or under the open door procedure.

However, in 2014, the European Commission criticised the PSO tariff for imposing a burden on imported electricity and took the position that the PSO tariff is in violation of the Treaty of the Functioning of the European Union. Consequently, Denmark committed to finding alternative financing of the Danish RE support by 1 January 2017. In November 2016, the government and a majority of the parties of the Danish Parliament reached an agreement hereon. Pursuant to the political agreement, the PSO tariff will be gradually phased out during the years 2017 – 2022. The RE Support will instead be financed directly through the national budget.

The amount of subsidies granted for electricity produced at offshore wind farms depends on whether the offshore wind farm is established following the open door procedure or a tender procedure14Electricity produced from offshore wind turbines that incorporate one or more significant experimental aspects may receive subsidies under a subsidy scheme solely applicable for such projects. Subsidies will be granted in the form of a CfD of 70 øre/kWh for a combination of the electricity production for 15,000 hours at the wind turbine’s installed capacity (full-load hours) and an electricity production of 12.7 MWh per rotor area (m2). The entire subsidy scheme is limited to a pool of 50 MW. The CfD may only be granted in the period running to the end of 2016 and within the pool of 50 MW..

3.2. Subsidies for open-door offshore wind farms

Offshore wind farms established pursuant to the open door procedure are entitled to subsidies under the subsidy scheme that applies to onshore wind farms.

The subsidy amount will depend on the date of grid connection. Wind farms that are connected to the grid after 1 January 2014 and produce electricity that is supplied to the Danish collective supply grid receive a premium of maximum DKK 0.25 per kWh in addition to the market price for electricity. Pursuant to this subsidy scheme, the premium together with the market price for electricity (the total settling price) may not exceed DKK 0.58 per kWh. Consequently, if the market price exceeds DKK 0.33 per kWh, the premium is reduced accordingly.

The premium is granted for a total amount of production (e.g. in MWh) determined for each project based on a combination of the wind farm’s installed effect and its swept area.15The installed effect accounts for 30 % and the swept area for 70 % of the calculated total amount. Specifically, pursuant to section 35 a, subsection 2, of the RE Act, the formula for determining the total amount for supported production in MWh for a wind farm is 6,600 hours x installed effect in MWh + 5.6 MWh x Swept area in m2.

It should be noted that the European Commission’s state aid approval of this subsidy scheme expires on 21 February 2018.16Unrelated to the PSO negotiations, as referenced above In order to be entitled to the premium under this subsidy scheme, wind turbines must therefore be connected to the grid prior to this date. At this time, no new subsidy scheme for offshore wind farm projects under the open door procedure has been announced for the period after 21 February 2018.

In addition to the premium, compensation for balancing costs is granted. This compensation is DKK 0.18 per kWh and is granted for 20 years from the time of grid connection.

3.3 Subsidies for tendered offshore wind farms

Tendered offshore wind farms are entitled to subsidies pursuant to a so-called “Contract for Difference” (CfD). The CfD is specific for each tendered offshore wind farm and is based on the lowest tendered price.

The CfD for tendered offshore wind farms are set out in the table below.

Offshore wind farm

Tender date

CfD

Horns Rev 2

7 July 2004

DKK 0.518/kWh (approx. EUR 0.07)

Rødsand 2

7 February 2008

DKK 0.629/kWh (approx. EUR 0.08)

Anholt

30 April 2009

DKK 1.051/kWh (approx. EUR 0.14)

Horns Rev 3

6 December 2013

DKK 0.77/kWh (approx. EUR 0.10)

The CfD is calculated per hour as the difference between the tendered price per kWh and the spot price of electricity in the relevant area, i.e. western Denmark (DK1) or eastern Denmark (DK2), as stated by the Nordic electricity exchange, Nord Pool. The total CfD in a given hour is the product of the CfD and the output measured in that hour. The CfD is not granted for electricity produced in hours when the spot price is not positive.

Upon conclusion of the concession agreement, the CfD is embedded in Danish law in a specific provision in the RE Act17Specifically as a subsection of section 37 of the RE Act., by ordinary legislative procedure of the Danish parliament.

The CfD is subject to the electricity from the offshore wind farm being supplied to the Danish collective supply grid. The CfD period will commence when the wind farm is in operation and connected to the grid, i.e. when the first kWh is supplied to the grid. It is granted for a limited amount of electricity produced, corresponding to a certain quantity of full-load hours. In addition, the CfD is limited to a specific period, e.g. in the current Kriegers Flak tender, the CfD is granted for a maximum of 30 TWh corresponding to 50,000 full-load hours at 600 MW, and for no longer than 20 years from the time of grid connection.

Energinet.dk decides on the amount of the CfD that is paid out to the concessionaire based on metered data of electricity supplied to the grid. However, it is possible to assign the CfD payments to a third party by notification to Energinet.dk of such assignment.

Balancing costs are not reimbursed or otherwise compensated.

4. Spatial planning

4.1. General

Spatial planning for offshore installations, including wind farms, is subject to the Act on Maritime Spatial Planning18Act no. 615 of 8 June 2016. which sets out a general framework for the planning of offshore installations and maritime activities.

The Act implements Directive 2014/89/EU on establishing a framework for maritime spatial planning. Under the Act, the Danish Minister of Business and Growth must prepare and implement a maritime spatial plan, organising the maritime activities in Danish waters. The overall purpose of the plan is to promote sustainable use of the maritime space and to contribute, through an ecosystem-based approach, to the sustainable development of energy sectors at sea, in maritime transport and in the fisheries and aquaculture sectors. Danish public authorities must take the maritime spatial plan into account when issuing permits etc. for offshore activities.

The first Danish maritime spatial plan must be adopted by 31 March 2021. We are not aware of the government planning to issue a maritime spatial plan before this date. The contents of the first plan are therefore currently unknown. Therefore, spatial planning of offshore wind farms is, for the time being, solely carried out by the DEA under the RE Act, in connection with the assessment of project applications and the planning of tender procedures.

4.2. Planning of open door wind farms

Under the open door procedure no specific sites are designated for offshore wind farms. Upon receipt of an application for a pre-investigation licence, the DEA will assess whether the area for which the licence is applied for is relevant for exploitation of energy. As indicated in section 2.3 above, the DEA’s assessment will, inter alia, include general planning considerations and rules on minimum distance from the coast.

If an application for a pre-investigation licence under the open door procedure concerns an area which is designated for the establishment of tendered offshore wind farms (see section 4.3 below), the pre-investigation licence shall be denied.

4.3. Planning of tendered offshore wind farms

Spatial planning of tendered offshore wind farms is regulated by political agreements in the Danish Parliament, designating specific sites for construction of (tendered) large-scale offshore wind farms.

In 2008, a political agreement was reached between a large majority of parties in the Danish Parliament in relation to the first site specific offshore wind tender. The tender resulted in the establishment of Anholt offshore wind farm, a 400 MW offshore wind farm in the Kattegat, the waters between Djursland and the island of Anholt.

In its report on future offshore wind power sites19Report on large-scale offshore wind farms in Denmark – Update on the future offshore wind farm sites, April 2011., the Offshore Wind Committee – consisting of the DEA, the Danish Nature Agency, the Danish Maritime Authority, Energinet.dk, and research centre DTU-Risø – has, on the basis of a strategic environmental assessment, identified areas suitable for the establishment of offshore wind farms. According to the committee, the establishment of offshore wind farms in these areas will not have a materially adverse impact on other maritime activities.

Following the above report, invitations to site-specific tenders were agreed on in the Energy Agreement 2012 and in a political agreement on growth that was concluded in June 2014, leading to the installation of offshore wind turbines at Horns Rev 3 (400 MW), Kriegers Flak (600 MW), and at near shore areas Vester Hav Syd and Vesterhav Nord (jointly 350 MW).20In the Energy Agreement 2012, site-specific tenders in relation to an aggregate capacity of 1,450 MW were agreed on. However, during political negotiations concerning the 2014 “growth package”, it was decided to reduce one of the envisaged tenders, the near shore tender, with 100 MW, to 350 MW.

5. Grid connection

5.1. General requirements

The Danish collective electricity supply grid comprises the transmission grid and the distribution grid. The electricity transmission grid is owned and operated by the Danish TSO, Energinet.dk, a non-profit company owned by the Ministry of Energy, Utilities and Climate on behalf of the Danish State. The electricity distribution grid is owned and operated by a number of grid companies.

Requirements for grid connection mainly follow from the RE Act, the Executive Order on Grid Connection of Wind Turbines21Executive Order no. 1115 of 18 September 2015 on grid connection of wind turbines and subsidies for electricity produced by wind turbines etc., as subsequently amended. and Energinet.dk’s technical regulations22Energinet.dk also owns the interconnectors that combine Denmark to its neighbouring countries.. Terms and conditions for grid connection are usually also stipulated by the DEA in the construction licence and the electricity production licence.

In order to be connected to the grid in Denmark the wind farm owner submits a verification report to the operator of the grid to which the wind farm will be connected In the verification report the wind farm owner will demonstrate that the wind farm complies with all applicable technical, functional and documentation requirements. Provided that such requirements are met, the grid operator is obliged to connect the wind farm to the collective grid.23The transmission grid and the distribution grid. As large-scale offshore wind farms are usually connected directly to the transmission grid, the grid connection will be made by Energinet.dk for such wind farms.

Decisions on grid connection made by either Energinet.dk as the TSO or an operator of the distribution grid may be appealed to the Danish Energy Regulatory Authority (DERA) within four weeks after the decision has been announced.24The appeal must be submitted to Energinet.dk which, within four weeks from receipt, will forward the appeal to the DERA with a statement and the information forming the basis for the decision.

5.2. Allocation of costs

In general, the offshore wind farm developer must develop and operate, at its own cost, the internal grid of the wind farm, up until the grid connection point. The grid operator is, on the other hand, responsible for developing and operating the facilities on the other side of the grid connection point. Parties will have to agree in a separate agreement on ownership limits, interfaces, and the allocation of costs, risks, maintenance etc. for the grid connection point itself.

As the grid connection point for offshore wind farms established under the open door procedure is located onshore, the owner of the wind farm pays for the necessary facilities to transport electricity all the way to shore.

However, where an offshore wind farm is established following a tender procedure, the grid connection point is placed offshore, and therefore the wind farm owner shall only be responsible for the internal grid of the wind farm up until the grid connection point, while Energinet.dk is responsible for establishing the facilities that transport the electricity to shore, such as transformer platforms and cables. The tender specifications will usually include detailed information on voltage levels, ownership limits, interfaces and the obligations of the wind farm owner in relation to the facilities for transmission of power to shore.

5.3. Liability/compensation for defective performance in the development phase.

If the owner of a tendered offshore wind farm fails to construct and connect the wind farm to the grid in accordance with the tender specifications, the wind farm owner can be held strictly liable for Energinet.dk’s losses suffered as a consequence thereof. Conversely, Energinet.dk is strictly liable for losses incurred by the wind farm, if it fails to meet the deadline for grid connection and other agreed conditions laid down in the tender specifications. The terms and conditions applicable to such strict liability, including any caps or guarantees, follow from the specific tender specifications.

5.4. Compensation for curtailment of electricity production

As TSO, Energinet.dk is entitled to order electricity producers to reduce or shut down their production if necessary. The rules for such downward regulation are different for offshore wind farms established under a tender procedure and under the open door procedure and vary according to the type of production.

Owners of offshore wind farms established following a tender procedure may be ordered to reduce or shut down production under the RE Act if necessary due to (i) defects in, or maintenance work in relation to, the grid connection facilities or the transmission grid or (ii) limitations in available transmission grid capacity.

In case of an order of downward regulation under the RE Act, Energinet.dk will compensate the owner of the offshore wind farm for losses incurred because of the reduction, corresponding to the situation where downward regulation was not ordered by Energinet.dk. This right to compensation applies for a period of 25 years, starting from the day on which the wind farm has received an electricity production licence and at least one wind turbine has been put into operation.

Owners of offshore wind farms established under the open door procedure are not subject to the same rules on downward regulation and compensation. The electricity production from these offshore wind farms may be reduced under the Danish Electricity Supply Act if necessary due to security of supply. However, under the Act, electricity produced using renewable sources has preferential access to the grid. Thus, Energinet.dk shall reduce electricity production using conventional energy sources before reducing electricity production from renewable sources. Electricity production reductions under the Electricity Supply Act may also trigger compensation to the producers, but generally in a more limited form than pursuant to the RE Act.

6. Decommissioning

6.1. General framework

Danish law does not include specific requirements regarding decommissioning of offshore wind farms. Decommissioning liabilities are regulated in the construction licence and in the electricity production authorisation issued by the DEA, as well as in the concession agreement (if the wind farm is established following a tender procedure).

During the recent near shore tender process the DEA indicated that it is not possible to exhaustively determine detailed decommissioning requirements, as the environmental requirements will have to be assessed at the time of decommissioning. Furthermore, there is no practical experience and only little knowledge on decommissioning, as no large offshore wind farms have been decommissioned in Denmark so far.

However, in early 2016 DONG Energy announced that it is planning to decommission Denmark’s first offshore wind farm in Vindeby. In its announcement, DONG Energy invites discussion on the future use of the infrastructure around the park (including transformer stations and cables), in order to assess if it could be of interest to other companies with activities in renewable energy. It is DONG Energy’s intention that Vindeby might set the first example for both efficient and environmentally friendly decommissioning of offshore wind parks, providing the companies involved with a head start in the area.25See http://www.dongenergy.com/en/media/newsroom/news/articles/worlds-first-offshore-wind-farm-on-its-last-turn.

6.2. General decommissioning requirements

The construction licence and the electricity production authorisation usually include conditions under which the owner of the wind farm (the licensee) is obliged, at its own account, to restore the area to its former condition, including remediation and clean-up of the area. Further requirements may apply pursuant to a decommissioning plan prepared by the owner of the wind farm which is subject to the approval of the DEA. In addition, the DEA may require the wind farm to be removed in full or in part in accordance with a timetable stipulated by the DEA. It may further be required that the owner of the wind farm provides an adequate financial guarantee for the decommissioning of the wind farm.

http://www.efkm.dk/en
https://ens.dk/en
http://www.energinet.dk/EN/El/Sider/default.aspx
http://www.vindmoellegodkendelse.dk

Authors

Peter Østergaard Nielsen
Bech-Bruun
Per Hemmer
Bech-Bruun