Offshore wind law and regulation in the Netherlands

Netherlands

1. Introduction

The Energy Agreement for Sustainable Growth - that was entered into in 2013 between, inter alia, the Dutch government, environmental and nature protection organisations and energy companies - has been an important driver for the development of offshore wind parks in the Netherlands. While there was some activity in the field of offshore wind prior to the Energy Agreement, resulting in approximately 1,000 MW offshore wind capacity in operation and under development 1 Offshore Windpark Egmond aan Zee (OWEZ) (108MW), Prinses Amaliawindpark (120 MW), Gemini windpark (600 MW), Luchterduinen windpark (129 MW) , the Energy Agreement announced an increase in offshore wind energy capacity to 4,450 MW in 2023 in order to meet the Dutch renewable energy target of 16% in 2023.

Consequently, a total extra capacity of 3,450 MW has to be constructed and made operational ultimately by 2023. For this purpose, the Dutch State has developed a new legislative framework of phased tenders for subsidy and wind permits to take place in the period 2015-2019.

This process is strictly controlled by the Dutch government, setting parameters for, inter alia: the pace at which the proposed new capacity will be developed; the maximum capacity of the wind parks; planning and zoning; and the grid connection. An important prerequisite for the development of the additional offshore wind energy capacity is a 40% cost reduction over the period 2015-2019.

The below table provides the tender schedule and key parameters.

Tender year

Designated area

Capacity

Maximum tender amount 2 Amounts are excluding costs in relation to the grid connection.

Base electricity price

2016

Borssele I & II

700MW

EUR 0.124/kWh

EUR 0.029/kWh

2016

Borssele III & IV

680MW

EUR 0.11975/kWh

EUR 0.030/kWh

2017

Hollandse Kust (South) I & II

700MW

EUR 0.00 in subsidy free tender

EUR 0.1075/kWh in tender with subsidy

N.A.

-

2018

Hollandse Kust (South) III & IV

700MW

EUR 0.00 in subsidy free tender

EUR 0.10325/kWh in tender with subsidy

N.A.

-

2018

Hollandse Kust (South) V (innovation site) 3 Site Borssele V is dedicated to innovation. The tender for this site will therefore differ from the other tenders. This tender opened in January 2018. This Guide does not address the innovation tender.

20MW

EUR 0.05449/kWh

EUR 0.025/kWh

2019

Hollandse Kust (North)

700MW

EUR 0.00 in subsidy free tender

EUR 0.10/kWh in tender with subsidy

N.A.

-

Under the new coalition agreement of October 2017, the Netherlands announced a further increase in offshore wind, with an envisaged total annual capacity of 1 GW for the period 2023-2030.

2. The Dutch tender scheme

The new legislative framework for the development of offshore wind distinguishes between a tender with subsidy and a tender without subsidy.

The first two tenders, that have taken place in 2016, were both tenders with subsidy. In these tenders subsidy and a wind permit were offered to the party with the lowest tender amount. In the first tender, that took place in April 2016 with respect to the sites Borssele I and II, the winning party was DONG Energy Borssele I B.V. with a strike price of EUR 0.073/kWh. In the second tender, that took place in September 2016 with respect to the sites Borssele III and IV, the winning party was a consortium of Shell, Van Oord, Eneco and Mitsubishi/DGE, for a strike price of 0.054/kWh.

The government’s 40% cost reduction requirement for the entire period 2015 - 2019 was already achieved in the first tender. Following the German precedent of subsidy-free bids, the Dutch government decided to allow for the submission of subsidy-free bids in the third tender: the tender regarding Sites I and II of the Hollandse Kust (Zuid) Wind Park Zone. In contrast to the two previous Borssele tender procedures, this tender opened in December 2017 without subsidies. However, given the uncertainty whether this tender would result in acceptable bids, it was decided that in the absence of an acceptable bid, subsequently a substitute tender procedure – including subsidy – would open for these sites which would be comparable to the 2016 offshore wind tenders regarding the Borssele Wind Park Zone.

Below we will first address the tender scheme with subsidy (Section 2.1) and subsequently the tender scheme without subsidy (Section 2.2).

2.1 Tender with subsidy

In the tender with subsidy, both subsidy and a wind permit are awarded to the party that offered the lowest tender amount. Below we will first address the relevant subsidy scheme, and then the key features of this tender scheme – such as the eligibility requirements for the subsidy and the wind permit and the ranking of applications.

The SDE+ subsidy 

The Sustainable Energy Incentive Scheme (or SDE+) forms the basis for the offshore tenders with subsidy. The SDE+ offers an operating (premium feed-in-tariff) subsidy for renewable energy. It compensates the difference between the production costs of renewable energy 4 Renewable electricity, green gas, heat and combined heat and power (CHP). (the “base amount”) and the cost price for fossil energy (the “correction amount”). Accordingly, the amount of the SDE+ contribution depends on the correction amount and therefore on the evolution of the energy price.

The SDE+ subsidy decision reflects the maximum subsidy over the entire period of the subsidy (for offshore wind being a period of 15 years). This maximum is determined based on the indicated capacity and the maximum number of full load hours of the offshore wind park. The final subsidy payments are calculated per year, based on the actual amount of energy produced and the actual energy price. If the maximum production eligible for subsidy in a certain year has not been used, the remaining production capacity eligible for subsidy can be used in the following year. On top of the subsidy period of 15 years, another whole year can be taken to reach the remaining unused production eligible for subsidy, in effect stretching the subsidy period to a total of 16 years (forward banking). On the other hand, if production in a certain year exceeds the maximum production eligible for subsidy in that year, the excess production can be used in a following year if production is lower than expected in the later year, provided that this form of banking is restricted to no more than 25% of the annual production eligible for subsidy (backward banking).

No SDE+ subsidy is granted for renewable electricity fed into the grid in case of negative electricity prices over a period in excess of six hours.

For each offshore wind tender with subsidy a specific Ministerial Order is issued, containing further (to a large extent site specific) tender rules for the relevant sites. This includes, inter alia: the timing of the tender, the deadline for commencement of operation, the maximum tender amount and base electricity price (see table in Section 1), the minimum and maximum capacity of the wind park and tender eligibility criteria, and criteria for ranking the bids (see below).

The SDE+ scheme was approved by the European Commission as compatible aid. The individual subsidy decisions with respect to installed capacities in excess of 250 MW will require notification to the European Commission under the state aid rules. However, if the SDE+ subsidy is tendered no such notification is required.

The wind permit 

The SDE+ subsidy application process is linked to the application procedure for the wind permits through the Offshore Wind Energy Act, which contains the key requirements in relation to the wind permits:

  • regulation to this Act coincides with the SDE+ subsidy procedure. The Minister will decide on the permit applications simultaneously with the SDE+ subsidy applications;
  • wind permit applicants will need to comply with the applicable subsidy requirements;
  • if more eligible permit applications are submitted, the Minister will issue the wind permit to the party that is awarded the subsidy.

Pursuant to the Offshore Wind Energy Act, the term for which the wind permit is granted shall not exceed 30 years.

Eligibility requirements for SDE+ subsidy and wind permit applications

Applications for the SDE+ subsidy and the wind permit must satisfy the below criteria. Applications that do not meet these requirements will be disregarded.

  • Financial feasibility; To determine whether the development and operation of the wind park meets this requirement, the applicant’s equity capital is required to equal at least 10% of the total investment of the wind park. If the applicant’s own assets amount to less than 20% of the investment required for the wind park, the applicant is required to provide a letter of intent from a financier in relation to the financing of the remaining part of the 20%;
  • Economic feasibility; In order to determine whether the applicant meets this requirement it has to submit an income statement specifying the envisaged investment costs, project costs and benefits and the projected return during the subsidy period. In addition, the application must contain a wind energy generation calculation by a reputable independent organization, including the technical specifications of the wind park and the P50-value for the annual electricity production. The full load hours on the basis of the net P50-value constitute the maximum number of full load hours that are used to determine the annual number of kWh that is eligible for subsidy;
  • Start of construction; The application must include a time schedule, setting out a number of milestones (including the start dates for commencement of construction, operation and the subsidy period), demonstrating that it is possible for construction to start within four years after the date on which the wind permit has become irrevocable;
  • Achievability and technical feasibility; The applicant’s project plan should be “achievable” and “technically feasible”. It is felt that the bank guarantees required of the winning bidder under the implementation agreement (see below under the heading ‘Implementation agreement and bank guarantees’) with the Dutch State provide important comfort that the subsidy receiver meets these conditions;
  • Compliance with site decision; The application must comply with a so-called “site decision”, which is a new instrument, developed specifically for the offshore wind tenders. See Section 3.2 for detailed information on the site decision.

Ranking the applications

Eligible applications that meet the above requirements will be ranked on the basis of the tender amounts, with subsidy awarded to the application with the lowest tender amount. This means that per-site subsidy will be awarded to only one project.

On the basis of the Borssele tender regulations parties were allowed to submit three separate subsidy applications: for site I, for site II and a combined application for sites I and II jointly. In the event of multiple applications for one site by one applicant, all applications by that applicant for the site in question would be denied. The same applied in the event of multiple combined applications by one applicant: all combined applications would be denied. A combined application was deemed to constitute one bid and would therefore either be rejected or awarded as a whole. The rationale was that it would otherwise not be possible to realise the envisaged synergy benefits. Although considered as one bid, a combined application had to specify the tender amount per site and would only be successful if these tender amounts constituted the lowest amount for each of the sites.

After the tender closure, the Minister of Economic Affairs will decide on the award of the subsidy and the wind permit within 13 weeks, which may be extended by a further 13 weeks. Both the subsidy award and the wind permit award are subject to objection and appeal proceedings. Objections must be filed within six weeks of the date of the tender award. Subsequent appeals can be filed within six weeks of the date of the decision on the objection.

Implementation agreement and bank guarantees

The subsidy is awarded subject to two conditions precedent:

  • the winning applicant enters into an implementation agreement with the Dutch State in the form as attached to the Tender Regulation, within two weeks from the date of the subsidy award; and
  • the provision of a bank guarantee in the amount of EUR 10m by a bank established within the EU, in the form as attached to the implementation agreement, within four weeks of the date of the subsidy award.

The main aim of these conditions is to give the Dutch State comfort that the wind park will become operational on time. If the winning applicant fails to satisfy these conditions within the deadlines, the subsidy will be awarded to the next ranked application.

A second bank guarantee - in lieu of, and in the same form as, the first bank guarantee - for an amount of EUR 35m shall be due within 12 months after the date of the subsidy award.

Pursuant to the implementation agreement, the bank guarantees provide financial security for any and all claims the State may have under that agreement. A one-off penalty of EUR 10m will be immediately due and payable if the subsidy decision is revoked within 12 months at the request of the applicant or if the second bank guarantee is not provided on time. In addition, the subsidy receiver will incur a penalty in the amount of EUR 3.5m in case of a delay in the start of operation of the wind park, increased by EUR 3.5m for each month that the delay continues (the penalty may become due a maximum of ten times). The penalties will be due without any proof of default or summons. The implementation agreement provides for an escape route if the site decision is amended following legal proceedings post subsidy award. In that case the subsidy receiver can withdraw from the implementation agreement without incurring any penalty.

Subsidy and wind permit transfer

Pursuant to the SDE Decree the subsidy may – unless exempted by the Minister of Economic Affairs – not be transferred to a third party prior to the start of operation of the wind park. However, it is possible to transfer the SDE+ decision after the start of operation of the park, without an exemption.

The wind permit may be transferred to a third party with the consent of the Minister of Economic Affairs. Neither the Offshore Wind Energy Act nor its explanatory memorandum address the grounds for obtaining such consent. It is possible for two or more parties to jointly submit a permit application and to jointly become permit holder. A transfer by one of the joint permit holders of its share in the permit also requires the consent of the Minister. However, if one of the joint permit holders ceases to exist, this will not affect the validity of the permit, which will in that case be held by the remaining permit holder(s).

Future developments

Following the opening of the first subsidy-free tender, it seems that the tender scheme with subsidy will only be applied in the absence of a successful subsidy-free tender. Whether this will be the case needs to be determined on a tender-by-tender basis.

The Ministry of Economic Affairs is currently working on the legislative amendment of the Offshore Wind Energy Act to amend the subsidy-free tender scheme. It is not clear whether and to what extent the tender scheme with subsidy will be maintained following this legislative amendment.

2.2 Subsidy-free tender

The Offshore Wind Energy Act does not only provide for a wind permit tender with subsidy, but also for a wind permit tender without subsidy. This subsidy-free tender scheme was applied for the first time in December 2017 with respect to the Hollandse Kust (Zuid) Wind Park Zone. For the purpose of this tender, the tender scheme set out in this Act was elaborated on in a ministerial order: the Order for Permitting Offshore Wind Energy regarding Sites I and II Hollandse Kust (Zuid) (Regeling vergunningverlening windenergie op zee kavels I en II Hollandse Kust (Zuid)). This ministerial order aims to provide temporary measures that facilitate a subsidy-free tender, whilst allowing the 2017-tender to take place in accordance with the envisaged time schedule as set out in Section 1. In parallel, the Ministry of Economic Affairs is currently working on a structural solution which entails the legislative amendment of the Offshore Wind Energy Act.

Eligibility requirements for wind permit applications

Subsidy-free wind permit applications must satisfy the same application criteria that apply in case of a tender with subsidy (see Section 2.1). Applications that do not meet these requirements will be disregarded. The aforementioned ministerial order includes additional requirements in relation to these application criteria.

Compared to the tender scheme with subsidy, the subsidy-free tender scheme has more stringent rules for satisfying the financial feasibility requirement. To meet this requirement under the subsidy-free tender scheme, the applicant’s equity capital should equal at least 20% of the total investment of the wind park (whereas under the tender scheme with subsidy this is 10%).

If a party applies for a wind permit for both Site I and Site II of the Hollandse Kust (Zuid) Wind Park Zone, the proportion of own assets shall be calculated taking into account the total investment costs for the wind parks at both sites. Where the applicant is a collaborative venture, the level of own assets of participants in the collaborative venture and their parent company (or companies) can be taken into account to determine the level of own assets. Where the applicant is a joint venture company or a limited partnership, the assets of the joint venture partners and their parent company (or companies), respectively the assets of the managing partner and its parent company (or companies), can be taken into account. It should however be noted that the assets of parties other than the applicant can only be taken into account with the written approval of such parties. Since the reliance on assets of other parties to satisfy the financial feasibility requirement does not entail that such parties guarantee the fulfilment of the applicant’s obligations, the concept of a parent company is given a broad interpretation in the context of the financial feasibility requirement.

A tender application will in any event have to include:

  • the wind park design;
  • a time schedule for the development and operation of the wind park (including certain milestones);
  • a cost and revenue assessment;
  • a social costs assessment;
  • a risk identification and analyses;
  • a description of measures to safeguard cost-effectiveness;
  • a list of parties involved in the development and operation of the wind park; and
  • a description of the knowledge and experience of such parties.

These requirements are further elaborated on by the ministerial order.

Ranking the applications

Wind permit applications in subsidy free tenders will be evaluated on the basis of the following six quality criteria:

Quality criteria

Assessment criteria

1. Knowledge and experience of parties involved

Based on the experience of the involved parties with wind parks with a capacity of 25 MW or more.

2. Quality of the wind park design

Based on the period in which the project company can enter into the agreements with TenneT TSO (i.e. the agreement for the realization of the grid connection and the connection and transmission agreement).

3. Wind park capacity

Based on the following three categories: (i) 342 MW-360 MW, (ii) 360 MW-370 MW and (iii) 370 MW-380 MW, whereby 350 MW is the maximum capacity guaranteed by TenneT TSO and 380 MW is the maximum capacity including overplanting.

4. Public costs

Based on the efficiency of the use of the offshore grid, which is established on the basis of the P50 value for the net electricity production.

5. Risk identification and analysis

Based on the following three sub-criteria: risks related to (i) changes in the financial yield of the electricity, (ii) the construction of the wind park and (iii) the operation of the wind park.

6. Measures to safeguard cost-effectiveness

Based on the following sub-criteria: mitigation of risks related to (i) changes in the financial yield of the electricity, (ii) the costs for the construction of the wind park and (iii) the costs of operating the wind park.

For each of these criteria the aforementioned ministerial order sets out the sub-criteria, quantitative standards, assessment criteria and their weighting. The wind permit will be granted to the bid with the highest ranking.

In the ranking of the applications, the greatest weight is attached to the quality criteria that contribute towards an assurance of timely commissioning of the wind park and continuity in its operation. Importance is also attached to maximum energy generation. For this reason, greater weight is attached to the quality criteria referred to above as Nos. 5 and 6: ‘risk identification and analysis’ (maximum score of 20) and ‘measures safeguarding cost-effectiveness’ (maximum score of 40), than to the other quality criteria (each having a maximum score of 10).

A team of independent experts, whose names will not be published (to prevent the potential interference by market parties), will be appointed to assess these quality criteria. Where two or more applications are equally ranked as the highest bids, the measures safeguarding cost-effectiveness referred to under No. 6 will be ranked higher than the other qualify criteria jointly.

For the time periods for the tender award and objection/appeal proceedings, we refer to Section 2.1 under ‘Ranking the application’.

The manner in which the winning bid meets the ranking criteria will become an integral part of the wind permit, and shall have to be maintained. Because no subsidy is involved, the winning tenderer(s) will not need to enter into an implementation agreement with the Dutch State or provide a bank guarantee. However, to ensure the timely realization of the wind park(s) in accordance with the wind permit, the Minister has the authority to impose a penalty for non-compliance. The amount of such penalty will be proportionate to the loss incurred by the Dutch State as a result of the non–compliance and is expected to equal the applicable penalties in the tender scheme with subsidy (see Section 2.1 under ‘Implementation agreement and bank guarantees’).

In the preparation of the adoption of the relevant site decisions and the ministerial order for permitting in relation to Sites I and II of the Hollandse Kust (Zuid) Wind Park Zone, the government has incurred costs of research in connection with the environmental impact report. Since the winning tenderer is not obliged to compensate the government for such costs, the tender scheme de facto provides a certain advantage to developers in the sense that it enables them to avoid such costs. In the context of its assessment of the SDE+ subsidy tender procedure on the basis of state aid rules, the European Commission has approved of the aforementioned cost reduction and its related benefit for the wind permit holder.

In case no acceptable bid is submitted in the 2017 subsidy-free tender regarding Sites I and II of the Hollandse Kust (Zuid) Wind Park Zone, a substitute tender procedure – including subsidy – for these sites will open. This tender will be comparable to the 2016 offshore wind tenders regarding the Borssele Wind Park Zone.

Future developments

At the time of this publication, the bill amending the Offshore Wind Energy Act has not yet been published. It may well be that the amended legislation will not be ready in time for the next tender, the 2018-tender with respect to Sites III and IV of the Hollandse Kust (Zuid) and that consequently this tender will be based on rules that are similar to the 2017-tender.

2.3 Changes in the project plan post tender award

The winner of the offshore wind tender must comply with its plan for the construction and operation of the wind park, as submitted together with its application. However, both the tender scheme with subsidy and the subsidy-free tender scheme allow for changes to this plan in relation to the development or operation of the wind park, providing for flexibility with regard to key characteristics of the wind park to enable bidders to use the most up-to-date technology and pursue cost reductions through innovation – as envisaged by the Energy Agreement.

Changes in case of tender with subsidy

The SDE+ Decree allows for “essential changes” to the project plan in relation to the development or operation of the wind park. Any such deviation from the original plan requires an exemption granted by the Minister of Economic Affairs. The Policy Rules Amendment of the Production Installation for Offshore Wind Energy provide insight into the decision-making process of the Minister in case of exemption requests in relation to essential changes with respect to characteristics of the production installation.
Pursuant to the policy rules “essential changes” are changes to the production installation that influence:

  • its location;
  • its nominal capacity;
  • the start of production within four years after the permit has become irrevocable;
  • compliance with the site decision;
  • compliance with the Offshore Wind Energy Implementing Regulations;
  • the technical, financial and economic feasibility of the project plan.

The following changes shall in any event qualify as essential changes:

  • the number of turbines of the production installation;
  • the positioning of the turbines;
  • the hub height;
  • type of turbine;
  • type of foundation.

A request for an exemption must be accompanied by an explanation of the effect of the change on the aspects set out above, as well as by an amended wind energy yield calculation (if applicable). The request for an exemption shall be granted if the Minister would have granted the subsidy application, had the change been included in the original subsidy application. This ensures that after the change, the realisation and operation of the production installation remains in compliance with the criteria as set during the application phase. Consequently, the change will not affect the position of the application in the ranking.

According to the explanatory notes to the policy rules, the grant of an exemption does not affect the tender price per kWh and the maximum number of kWh for the subsidy period, as set out in the subsidy decision.

An exemption is subject to objection and appeal proceedings.

Changes in case of subsidy-free tender

The Offshore Wind Energy Act allows for changes to the wind permit. In relation to the Sites I and II of the Hollandse Kust (Zuid) Wind Park Zone, the procedure for amendment of the wind permits is elaborated on in the Policy Rules of 11 December 2017 regarding Amendment of the Offshore Wind Energy Permit for Sites I and II Hollandse Kust (Zuid).

Pursuant to these Policy Rules, a request for amendment of the wind permit should include a substantiation of the effect of the envisaged amendment on:

  • the location of the wind park;
  • its nominal capacity;
  • the start of production within four years after the permit has become irrevocable;
  • compliance with the site decision;
  • the execution of the project plan;
  • the technical, financial and economic feasibility of the project plan;
  • as well as an amended wind energy yield calculation, if applicable.

The Minister of Economic Affairs will amend the wind permit if the quality of the wind park will not be reduced by the envisaged amendment. This requires that the project would have obtained the same or a better ranking on the basis of the envisaged amendment.

Given the fact that a delay in the development of the wind park is deemed undesirable, an extension of the date on which the permit holder reaches agreement with TenneT - on the terms and condition for the connection of the wind park to the offshore grid - shall only be allowed in as far as such delay will not result in a lower rating in relation to the relevant quality criteria.

3. Spatial planning

3.1 Designated areas for offshore wind

One of the key elements of the legislative framework for offshore wind is the central role played by the Dutch government in the planning and zoning of the wind parks. This is effectuated through the appointment of designated areas for offshore wind and subsequently adopting (within these areas) so-called site decisions for the development of the wind parks.

In the National Water Plan 5 The current National Water Plan (also referred to as the second National Water Plan or NWP2) covers the period 2016-2021 and is the successor of the National Water Plan that was published on 22 December 2009 in relation to the period 2009-2015. – which finds its legal basis in the Water Act and contains the water policy and related spatial planning for the Netherlands – the Dutch Ministers of Economic Affairs and Infrastructure & Environment have allocated four areas for offshore wind parks. The development of offshore wind parks will be restricted to these areas; wind permits will not be awarded for areas outside these designated areas.

These designated areas offer a total capacity of over 17,500 MW (assuming a 6 MW per km2 ratio). However, due to conflicting interests with other offshore activities, the areas that may actually be used for wind parks are likely to be smaller. The five tenders organised by the Dutch State to meet its renewable targets for 2023 are for the areas Borssele and Hollandse Kust.
Except for two strips in the Hollandse Kust area that are located 10-12 nautical miles off the Dutch coast, the four designated areas lie behind the 12-mile zone (the zone 22 km off the Dutch shore).

3.2 Site decisions

Within aforementioned designated areas wind parks may only be developed on locations designated by the Minister of Economic Affairs in a so-called site decision (in Dutch: kavelbesluit). The site decision is a new instrument that finds its legal basis in the Offshore Wind Energy Act that entered into effect on 1 July 2015.

Pursuant to this Act, the Minister of Economic Affairs shall in the site decision take into consideration:

  • the fulfilment of social functions of the sea, including an efficient use of the sea;
  • the implications of the site decision for third parties 6 Third party interests may, inter alia, relate to shipping routes and oil & gas extraction. ;
  • environmental interests, including ecological interests;
  • wind park development costs on the relevant site;
  • the interest of having an efficient grid connection;

The site decision shall in any event include terms and conditions in relation to:

  • the rights and interests of third parties in relation to the relevant site;
  • the protection of the environment;
  • the preservation of Natura 2000 areas and compensation measures pursuant to the Nature Protection Act;
  • the provision of exemptions under the Flora and Fauna Act;
  • the interest of an efficient use of the site by the wind park;
  • the term of the wind permit;
  • the costs incurred for the preparation of the site decision, including the conduct of relevant surveys and the required security for decommissioning;

In addition, the site decision shall contain a description of:

  • the measures that aim to reduce or mitigate the effects of the development and operation of the wind park;
  • temporary measures to develop the wind park;
  • the geographical dimension of the site and the cable route;
  • the results of the meteorological and oceanographic survey, the soil survey, the ecological soil survey, the archeological survey and other ecological surveys;

To integrate the aforementioned interests and measures into the site decision, the Dutch State conducts a large number of surveys. The results of these surveys will be published in the site decision. Permit applicants therefore do not have to make an individual assessment of these aspects. The costs in relation to these surveys is for the account of the State and will not be borne by the party that wins the tender.

The terms and conditions of the site decision shall, to a large extent, be location specific. The site decisions that have already been published include a number of specific pre-conditions for the wind park, such as: the minimum rotor surface of individual turbines and the aggregate rotor surface of all wind turbines jointly, the maximum number of turbines that may be installed, the minimum and maximum capacity of the individual wind turbines, the minimum distance between the turbines, the minimum tip height and the maximum height, and the permitted turbine foundations (other foundations may be permitted pursuant to an environmental impact assessment). Mitigation measures that have been included in the current site decisions include, for example: measures to reduce bird-wind turbine collisions; noise reduction requirements to avoid disruption of the habitat of porpoises, seals and fish; and the rotation of the turbine blades out of the wind in the event of large bird migration. Other mitigation measures may consist of noise reduction during pile driving to protect porpoises and seals, as well as measures to protect bats. Pursuant to the site decisions that have currently been published the permit holder is obliged to make demonstrable efforts to design and build the wind park in such a way that it actively enhances the sea’s ecosystem and contributes to the local and regional economy and to cooperate in the environmental monitoring and evaluation programme of the Minister of Economic Affairs.

4. Grid connection

4.1 Offshore grid

The new offshore wind parks shall be connected to an offshore grid to be developed and operated by Dutch transmission system operator TenneT TSO. 7 For this purpose TenneT TSO has been appointed offshore transmission system operator. The offshore grid aims to realise a 40% cost reduction for the connection of the offshore wind parks and a 10% overall cost saving for offshore wind energy. This will be effectuated due to a reduction in investment costs, financing charges and maintenance costs as a result of synergy benefits, as well as cost savings for the wind parks due to the higher availability of the connection to the offshore grid.

For each of the five offshore wind tenders TenneT will construct a platform at sea. Each platform will connect two wind parks 8 With the exception of TenneT platform Beta that will connect parks on the sites Borssele III, IV and V. to the national onshore transmission system through two 220kV-cables, each cable providing a guaranteed capacity of 350 MW. Capacity in excess of 350 MW will not be guaranteed by TenneT. Pursuant to the Tender Regulations 2015 and 2016 it will, however, be allowed to exceed this capacity up to 380 MW 9 With the exception of Borssele site III. For this site the maximum capacity is 360 MW. (overplanting). The wind turbines will be connected to the TenneT platform through 66kV cables, making the Dutch offshore wind parks the first in the world to be connected by a voltage level of 66kV instead of 33kV.

4.2 Development framework and investment plan

In order to plan the investment in the offshore grid, the Dutch government deemed it desirable to provide guidance in the form of a development framework. This framework outlines the design and construction of the offshore grid and describes its main functional and technical requirements. It determines the duties of TenneT as offshore transmission system operator, provides the sequence of the development of the sites and sets the timetable for commissioning of the connection for the sites, as illustrated by the table below.

Sites

Commissioning 10 The dates for the connection of the sites Borssele I and II and Hollandse Kust (Zuid) I and II are final. The other deadlines are currently indicative.

Borssele I & II

31 August 2019

Borssele III, IV & V

31 August 2020

Hollandse Kust (Zuid) I & II 11 In relation to the planning for Borssele site V. See note 3.

30 June 2021

Hollandse Kust (Zuid) III & IV

Q1 2022

Hollandse Kust (Noord) Q1 2023

Q1 2023

On the basis of the development framework, TenneT draws up a bi-yearly investment plan setting out the envisaged investments, performance targets, deadlines and plans for capacity expansion. The investment plan has to be approved by the Dutch regulator, the Authority for Consumers & Markets (“ACM”).

TenneT shall in principle be compensated for the costs of the offshore grid through the regulated transmission tariffs. However, to avoid a substantial increase in the transmission tariffs, TenneT is granted a direct subsidy as compensation for its costs incurred in developing the offshore grid.

4.3 Realisation Agreement and Connection & Transmission Agreement

The operator of the wind park shall enter into a realisation agreement and a connection & transmission agreement with TenneT. The realisation agreement sets out the terms and conditions regarding the development of the connection for the wind park, addressing aspects such as the basic design and technical specifications of the connection and the TenneT platform, as well as operational arrangements and the exchange of information between TenneT and the wind park developer. Pursuant to this agreement, TenneT is obliged to realise the connection on or before the date set in the development framework. After the realisation of the connection, the relationship between the wind park operator and TenneT will be governed by the connection and transmission agreement.

Pursuant to these agreements, the implications of a delay or unavailability of the connection or the offshore transmission system will be solely addressed in the Electricity Act 1998.

4.4 Compensation for delay and unavailability

The Electricity Act 1998 and the Ministerial Order Offshore Electricity Grid Compensation Rules set out the liability regime applicable to TenneT in case of a delay in the completion of the offshore grid or the unavailability of the offshore grid. Pursuant to this liability regime, the wind park may be compensated for postponed SDE+ revenues, postponed or missed revenues from electricity sales and consequential damages (including, inter alia, costs of mitigation measures, hiring additional equipment and staffing, e.g. to perform works at a later time – but excluding financing costs, which are deemed to be included in the postponed revenues).

Damages due to delayed completion of the grid

A delay in the construction of the offshore grid is deemed to occur when the completion of the connection of the wind park and the system between the wind park and the onshore transformer station exceeds the completion date set out in the development framework. To qualify for damages, the foundation of the wind park has to be in place and the wind park operator is required to demonstrate that the wind park would have been ready to start operations, had the delay not occurred and it had not taken measures to mitigate damages. A delay in the construction of (part of) the offshore wind park shall therefore affect the compensation payable by TenneT.

In case of a delayed completion of the grid, damages may consist of: consequential damages (as set out above), postponed SDE+ (if it concerns a tender with subsidy) and postponed electricity sales revenues. The postponed SDE+ and postponed electricity sales revenues are calculated based on the assumption that missed subsidy revenues due to the delayed completion will be received at the end of the subsidy period (banking to year 16) and missed electricity sales will be realised at the end of the lifetime of the park (after 20 years). On the basis of these assumptions and a discount rate of 7%, the postponed revenues are calculated as follows:

[(SDE+ Subsidy Amount – SDE+ Subsidy Amount/2.95) + (SDE+ annual electricity price pursuant to the SDE Decree – SDE+ annual electricity price pursuant to the SDE Decree /3.87)] x electricity that could not be transported.

Where:

  • The SDE+ Subsidy Amount is the base amount per kWh for which SDE+ subsidy has been granted pursuant to the SDE Decree minus the SDE+ electricity price applicable for that year pursuant to the SDE Decree.
  • The electricity that could not be transported is determined on the basis of the wind speed, and the electricity production profile of the wind park, while taking into account any interruptions in the production of electricity by the wind park due to delays, disruptions or maintenance, as well as any electricity that was transported through the grid. For this purpose a computation model is set out in a ministerial order.

In this calculation missed electricity over a period of five days per year shall not be taken into account, since this period is deemed necessary for scheduled maintenance of the grid. By disregarding this period, wind park operators are encouraged to schedule their own maintenance as much as possible within the same period. The resulting damages will be increased with legal interest as of the occurrence of the damages.

Damages due to unavailability of the grid

In case of an interruption of transmission of electricity, damages may consist of: consequential damages (as set out above), postponed SDE+ (if it concerns a tender with subsidy) and missed electricity sales revenues. The postponed SDE+ revenues are calculated based on the assumption that the flexibility that is built into the SDE+ scheme allows for the missed SDE+ revenues to be made up in a period of five years. On that assumption and a discount rate of 7%, the postponed SDE+ revenues and missed electricity are calculated as follows:

[(SDE+ Subsidy Amount – SDE+ Subsidy Amount/1.4) + SDE+ annual electricity price pursuant to the SDE Decree] x electricity that could not be transported.

Missed electricity over a period of five days per year shall not be taken into account in the determination of postponed electricity sales and postponed subsidy revenues. This is based on the assumption that per cable a period of five days will be necessary for regular maintenance, in which case 50% of transport capacity is available.

5. Decommissioning

Decommissioning shall take place in accordance with a decommissioning plan to be developed by the wind park operator. The Directorate General for Public Works and Water Management (Rijkswaterstaat), the competent authority in relation to the Water Act, is currently preparing guidelines for decommissioning.
Pursuant to the site decisions, decommissioning has to be started within two years after the operation of the wind park is discontinued and must be completed ultimately 30 years after the date on which the wind permit has become irrevocable. The wind park operator shall provide a bank guarantee for decommissioning in the amount of EUR 120,000 per MW, as of the start of the construction of the wind park. This amount shall be annually indexed (for the first 12 years resulting in an annual increase by 2%). The amount and index are subject to a periodic review by the Minister of Economic Affairs.

Picture of Cecilia Weijden
Cecilia van der Weijden
Partner
Amsterdam
Maurits-Rabbie-CMS-NL
Maurits Rabbie
Advocaat
Amsterdam
Picture of Dominique Voorst tot Voorst
Dominique van Voorst tot Voorst