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Legal developments in wind energy in the Netherlands

14/05/2012

The Netherlands plans to commit to a total installed onshore wind energy capacity of 4000
MW by 2015. Currently, approximately 50% of that figure has been achieved. In addition,
the current 228 MW of offshore capacity needs to be substantially expanded by 2015. With
the necessary subsidy already allocated, 730 MW of additional offshore wind capacity can be
built, after which the total capacity of offshore wind energy will amount to approximately
1,000 MW. By 2020, installed capacity should be expanded to 6000 MW onshore and 6000
MW offshore. If these targets are achieved, it will be possible to generate more than 30
billion kWh of electricity, which represents almost a third of the national consumption. In
view of aforementioned targets, the Dutch government has implemented a set of legislative
and policy measures. This newsflash provides an update of our wind energy newsflash of
November 2010 and gives an overview of recent developments in legislation and policy
regarding onshore and offshore wind energy in the Netherlands.

Priority for wind energy on the grid

Priority for sustainable energy and congestion management
The Renewable Energy Directive of 23 April 2009 (2009/28/EC, referred to below as the
"Directive") obliges EU Member States to ensure priority or guaranteed access to the national
grid for electricity from renewable sources, such as wind energy, as well as priority in
transportation. Under the decree "better utilization of transport capacity" of April 2009, all
parties connected to the grid in the Netherlands have an equal right to transport, regardless
of the date of connection. This means that new electricity production can be connected to the
national grid without any transport restrictions.

In order for sustainable energy to be transported with priority in case of congestion on the
grid (build-up of electricity due to overloading), the Priority for sustainable energy Act of 2
December 2010 introduces congestion management. The Act amends the Electricity Act 1998
by requiring grid operators to apply congestion management in the event of congestion on
the electricity grid, and to give priority to electricity from renewable sources, such as wind.
The congestion management system is mapped out in greater detail in the draft decree and
draft regulation congestion management electrical power of 3 May 2011. The decree and the
regulation have however not yet entered into force.

The same applies to the provisions in the Electricity Act 1998 on priority for sustainable
energy. The reason why these provisions have not yet entered into force is that during the
deliberation of the bill in the Senate a discussion has arisen over the allocation of costs. The
costs of congestion management were intended to be for the account of the producers of
conventional power (so-called 'grey' producers) in a particular congestion area. However,
because of a possible conflict with Community law, the Minister of Economic Affairs,
Agriculture and Innovation (hereinafter the "Minister") decided to consult the European
Commission. On 16 April 2012 Parliament was informed by the Minister on the results of the
consultations with the Commission: with regard to the allocation of costs, a distinction
between gray and green producers is not allowed and, therefore, a choice must be made to
either (i) include the costs in the transportation tariffs (socialization), as currently applied, or
to (ii) pass on the costs to all producers. The Minister has indicated that the decree, the
regulation and the relevant provisions in the Electricity Act 1998 will come into effect after
receiving the opinion of the Council of State. In first instance a choice has been made for
socialization of the costs (option (i)). The Minister will, however, consider to implement
option (ii) in the pending legislative process entitled STROOM (which process aims to
streamline, optimize and modernize the Electricity Act 1998 and the Gas Act), so that
producers eventually may need to contribute (part of) the costs of congestion management.

Since April 2011, TenneT, the operator of the national grid, has applied congestion
management on the Maasvlakte. Recently, transport problems have also occurred in Zeeland
and West Brabant and it is expected that in 2012/2013 congestion may arise in the Northern
Netherlands, especially around Eemshaven. Both on the Maasvlakte and in the Northern
Netherlands permanent solutions are being worked on through expansions of the grid,
respectively the Randstad 380 kV South Ring (early 2013) and the North West 380 kV (late
2016). In the Westland congestion management has previously been applied, but this was
resolved in 2010by capacity expansion of the high-voltage electricity grid.

Offshore wind energy

The allocation of offshore locations and the new concession system
The Netherlands currently has two offshore wind farms: the Princess Amalia Wind Farm off
the coast of IJmuiden and the Offshore Windpark Egmond aan Zee (OWEZ). These parks,
realized in the so-called first round of development, have a combined installed capacity of
228 MW, and were created with a subsidy under the MEP scheme (Environmental Quality
Electricity Production), the predecessor of the SDE subsidy. On the basis of the second
development round, the SDE-tender 2009, two subsidies were provided in May 2010: to
Buiten C.V. and ZeeEnergie C.V., both currently owned by Dutch investment company
Typhoon Offshore and Dutch energy and waste company HVC, for the realization of the
Gemini wind parks located above Schiermonnikoog (with a combined capacity of 600 MW).
The remaining budget of the SDE-tender 2009 was awarded to Eneco on 4 November 2011
for the realization of wind farm Luchterduinen at location Q10 (up to 150 MW). In total, with
the budget reserved for this second round of development, approximately 750 MW shall be
built, which corresponds to the electricity demand of nearly 800,000 households.

According to the national target, the installed capacity at sea is to be expanded to 6000 MW
in 2020. In view of this long term aim, the term of the 9 permits that did not receive SDE
funding in the second development round, has been extended. These permits –representing
a potential capacity of 2530 MW – shall now remain in effect until 2020. For the third
development round, the existing system of permits will be replaced by one of concessions.
The bill introducing the new concession system is expected to be ready before 2015 and may
include concession terms of 40 years instead of the usual term of 20 years.

Recommendations of the Offshore Wind Energy Taskforce
In December 2009 the Minister appointed an Offshore Wind Energy Taskforce to advise the
government on the development of offshore wind energy. The recommendations of this
Taskforce (as published in June 2010) will be taken into account in the development of the
new concession system and the promotion of cost-reducing innovation and technology
relating to wind energy, such as for example through investment in the FLOW program,
which tested innovative foundation techniques for wind turbines in the North Sea, or through
the energy innovation policy of the Topsector Energy (see below). In addition, legislation shall
be prepared for the development of a grid at sea connecting the offshore wind farms to the
shore. Pursuant to this legislation TenneT will become responsible for the grid connection of
off shore wind farms, whereby particular attention will be paid to the way TenneT will be able
to finance and recoup the required investments. Whether these plans will be changed given
the problems that TenneT is currently experiencing in Germany, remains yet to be seen.

Green Deals
In October 2011 the Dutch government has entered into 59 so-called Green Deals:
agreements pertaining to public-private collaboration, that allow sustainability initiatives that
contribute to green growth, to be more swiftly realized. They are the first tangible steps
towards a sustainable economy as stipulated in policy frameworks such as the Energy Report
2011, the Industry Policy and the Sustainability Agenda. In the next years, the government
aims to enter into more Green Deals. The second tender round for Green Deals closed on 29
February 2012.

In the context offshore wind energy three Green Deals are relevant. All of these three Green
Deals aim to increase the earning potential of wind energy, mostly through cost reduction.
According to the Netherlands Environmental Assessment Agency (PBL) the proposed cost
reduction by 40% between now and 2020, is unlikely to make the offshore wind industry
eligible for subsidy under the SDE+ scheme (within the so-called free category, see below).
The Green Deals are nonetheless an important step towards further cost reduction which is
necessary for a major commercial roll-out of offshore wind energy. One of these Green Deals
is entered into by the NWEA with the Dutch government and forms the basis for the
Innovation Contract Wind at Sea (see also under the next paragraph). It aims to realize
market-driven technological innovations that lead to cost reduction by testing innovations in
pilot projects that are connected to existing or developing wind farms, whereby the NWEA
shall be responsible for the coordination and organization of these pilot projects and the
government shall assume a facilitating role, for example by designating additional wind
energy areas off the so-called Dutch Coast (by 2015), or by creating new legislation for an
offshore grid that provides a favorable investment climate for offshore wind energy projects.

Topsector Energy and the Innovation Contract Wind at Sea
As part of the business policy of the Rutte government, nine sectors in which the Netherlands
hold a strong global position were appointed as so-called 'topsectors' for which a policy will
be developed to maintain and strengthen their global position. The Topsector Energy is one
of them. This topsector aims to strengthen the Dutch energy sector and develop a long term
energy innovation policy. For this purpose, a think tank was created to enable
representatives of the so-called 'golden triangle' (companies, knowledge institutions and the
government) to work on an innovation contract in relation to, inter alia, offshore wind
energy, which is considered a promising renewable energy option for the Netherlands. This
innovation contract will contain agreements on the innovative solutions that will be developed
by each of the parties involved and the financial contributions made by them. This has
resulted in the draft Innovation Contract Wind at Sea which was subsequently incorporated,
together with six other innovation contracts in relation to energy related topics, into one
innovation contract for the Topsector Energy that was presented to the Minister and was
signed by all parties on 2 April 2012.

European energy infrastructure package
In accordance with its paper of 17 November 2010 entitled "Energy infrastructure priorities
for 2010 and 2030: A blueprint for an integrated European energy network", the European
Commission has on 19 October 2011submitted a proposal for a regulation on the guidelines
for the Trans-European energy infrastructure. This proposal aims to modernize and enlarge
the European energy infrastructure by, amongst other things, streamlining the permitting
processes and by boosting the investments for so-called 'priority corridors' and 'areas of
trans-European energy infrastructure'.

The development of an offshore transmission network for (future) wind farms in the North
Sea is considered such a priority electricity corridor, to which the aforementioned regulation
will apply as of 1 January 2013, if accepted and published on time. The European
Commission has asked the North Sea Countries Offshore Grid Initiative (NSCOGI) - in which
the Netherlands participates – to identify North Sea offshore grid projects which are eligible
for funding by the European Union. Since the proposal is a regulation, it will not need to be
implemented into national legislation but will have direct effect. The General Administrative
Law (Algemene Wet Bestuursrecht) and the state coordination program
(rijkscoördinatieregeling), however, will have to be streamlined in accordance with this
regulation.

Onshore wind energy

Ambition
According to the government, onshore wind energy can substantially contribute towards
achieving the national target of 14% renewable energy by 2020, as determined by the EU.
Since generating electricity through wind energy on land is considered a relatively
inexpensive technique, it can be encouraged in a cost-effective manner. The government has
the ambition to have 6000 MW of onshore wind power installed by 2020. Although the
development of onshore wind power has been stagnating at 2000 MW for a few years,
according to a NWEA survey this goal is spatially feasible, and a further increase after 2020
is possible. According to the government, large-scale wind farms are expected to make a
large contribution to the envisaged development of onshore wind energy.

Large scale wind farms
Since their capacity exceeds 100 MW, large scale wind farms will fall under the state
coordination program (rijkscoördinatieregeling). Hence, the permitting procedures for these
wind farms can be shortened and streamlined, and consequently, such projects can be
realized swiftly. Currently, a large-scale wind farm is being built in Zuidlob in the Flevoland
province. Nuon-subsidiary WEOM and farmers located in the area referred to as De Zuidlob
(the most southern part of the municipality Zeewolde) strive to make this 108 MW wind farm
fully operational by 2012.

Furthermore, the construction of the Noordoostpolder wind farm (450 MW) is bound to begin
this year. The wind turbines are being built along the embankments of the Noordoostpolder,
both onshore and offshore in the IJsselmeer. For this purpose, the zoning plan was adjusted
by means of a national integration plan (rijksinpassingsplan). Several appeals were brought
up. However, by verdict of 8 February 2012 of the Administrative Law Division of the Council
of State, the legal effect of the national integration plan and the implementing decrees for
the first phase were ruled legitimate. Furthermore, a number of decrees of the second phase
were submitted for public inspection. It was possible to appeal against these decrees until 6
April 2012. The Noordoostpolder wind farm is expected to become operational in 2015.

Other major onshore wind farms that are currently being planned are: wind farm N33 near
Veendam (over 130 MW), wind farm De Drenthe Monden (300 - 450 MW) in the municipality
of Borger-Odoorn, and wind farm Oostermoer (120-150 MW) in the adjacent municipality of
Aa en Hunze. In a national spatial plan for onshore wind, which is currently being drafted and
which is expected to be sent to Parliament by the end of 2012, spatial reservations are being
made for more large-scale onshore wind farms. In addition, a framework to assess spatial
implications shall be developed to speed up the permitting procedures through the state
coordination program (rijkscoördinatieregeling).

Subsidy decree Stimulation Sustainable Energy (SDE+)
According to the governmental agreement of 2010, the promotion of sustainable energy
ought to be more cost-effective. For this reason the SDE subsidy scheme was transformed
into the SDE+ scheme in 2011.

The SDE+ regulation for 2012 entered into effect on 13 March 2012. For 2012, the SDE+
budget amounts to 1.7 billion euros, for which all renewable technologies have to compete.
In 2012 (just as in 2011) one subsidy maximum will apply to all renewable energy options.
The subsidy scheme will be gradually opened, allowing the most cost effective technologies
to apply for the available subsidy budget first. In addition, there will be a 'free category' that
allows frontrunners to apply for SDE subsidy in an earlier phase, which improves their
chances of acquiring subsidy, but awards them a lower subsidy than the estimated cost price
of their particular technology would warrant for.

In 2012 the SDE+ has two categories for onshore wind: one for wind turbines under 6 MW
and a second one for wind turbines of 6 MW or more. The category of wind turbines that
produce less than 6 MW was introduced this year as an interim solution which was deemed
necessary because the envisaged differentiation within the SDE+ between low-wind areas
and wind-rich areas was postponed until 2013. Pursuant to this interim solution the turbines
of less than 6 MW will be allowed to produce more full load hours (2650) than in 2011
(2200). Given the greater number of full load hours, the estimated cost price (cost /kWh,
referred to as the 'basic amount') is however lower. As a consequence, these smaller
turbines are eligible for SDE subsidy one phase earlier (1 May 2012 instead of 19 June
2012), which improves their chances to acquire subsidy from the total available SDE budget.
Not only the SDE+ regulation, but also the SDE decree was changed as per 13 March 2012.
One of the changes aims to promote the consumption of self-generated renewable energy.
Consequently, under the SDE+ self supply (zelflevering) of onshore wind energy is now
eligible for subsidy. In addition, it is now possible to designate by ministerial regulation
categories of production systems that can carry forward unused eligible production to a
subsequent year.

Green Deals
In the first round, seven Green Deals were entered into in relation to onshore wind energy.
Most of these deals (ultimately) aim to scale-up onshore wind production through
innovation. In some cases this involves onshore wind energy for own use, such as the pilot
project De Windcentrale, which involves co-ownership of local residents and other interested
citizens and is considered innovative because self-supply so far only occurred in relation to
installations located on or nearby the consumer's premises, such as solar panels. If the
innovative concept of De Windcentrale is successful, it will, according to the PBL, be widely
used by wind cooperatives, real estate developers and municipalities and scale-up onshore
wind energy.

The Crisis and Recovery Act

Extension for indefinite period
The Crisis and Recovery Act includes provisions for speeding up infrastructure projects, as
well as projects relating to sustainability, energy, and innovation. In addition to generic
measures to speed up projects that are also relevant to wind energy, the Act includes
specific provisions regarding wind energy. The Act aims to combat the economic crisis in the
short term, and to promote the long-term recovery of the economic structure of the
Netherlands. In view of this objective, the Act is temporary and expires in principle on 1
January 2014. It will however continue to be applicable to projects in which the first
implementation decree dates prior to 1 January 2014. In addition, the amendments to
various laws that originate from the Crisis and Recovery Act, will remain in force after 1
January 2014. Based on the government agreement and the 2010-2011 evaluation rapport
of the Crisis and Recovery Act, a bill is currently pending in Parliament to extend the
duration of the Crisis and Recovery Act for an indefinite period.

Radar stations
One specific problem that occurs in relation to the construction of wind parks is interference
with the radar stations of the Ministry of Defense. Under the Second Military Areas Structure
Plan, zoning plans must include restrictions for the construction of buildings for the benefit of
transmitters and receivers (including radar stations), whereby the advice of the Ministry of
Defense will need to be requested in case of interference caused by a wind park. Because
this will delay the construction of wind parks, the Decree on General Rules for Spatial
Planning provides for the possibility to introduce a more flexible procedure by ministerial
regulation. In anticipation of this ministerial regulation, the entry into force of the decree has
been suspended. Both are expected to enter into force on 1 October 2012. Until that moment
the Crisis and Recovery Act contains a provision that provides similar flexibility.

What next?

Legislation and policy in the field of wind energy is developing steadily, and despite the
recession the ambitions of the current caretaker government seem unchanged.

The pace at which offshore wind will develop in the Netherlands will to a large extent be
determined by the concessions system for offshore wind parks; as indicated, a bill to this
effect is expected before 2015. It is hoped that current and future Green Deals and the
innovation contract of the Topsector Energy will contribute to the cost reduction of offshore
wind energy. In addition, in the foreseeable future specific projects will be identified by the
NSCOGI for the development of the North Sea Offshore grid.

Concerning onshore wind, there is a strong growth perspective, in particular in relation to the
development of large scale wind farms. The Act Priority for sustainable energy and
congestion management and its accompanying decree and regulation are expected to enter
into force in the first half of 2012, and will ensure that in case of congestion the grid operator
will give priority to wind energy and other forms of sustainable energy. Furthermore, the
SDE+ scheme may in the future differentiate between low-wind areas and in wind-rich areas
and it will furthermore be interesting to see whether the innovative co-ownership structure
of the pilot project De Windcentrale will be successful.

We will keep you informed on these and other future developments in relation to wind
energy.

Contact details

The above information is not intended to be a complete summary of new legislation and
regulations. Please do not hesitate to contact us or to consult our website if you wish to have
more information about developments in relation to wind energy.

Authors

Picture of Cecilia Weijden
Cecilia van der Weijden
Partner
Amsterdam
Picture of Jacqueline Feld
Jacqueline Feld