Legal developments in wind energy in the Netherlands

According to Statistics Netherlands (CBS) the percentage of renewable energy in the Netherlands in 2013 was 4.6%. Pursuant to the Energy Agreement for Sustainable Growth (hereafter referred to as: "the Energy Agreement"), which was entered into between the Dutch government, employer and employee unions, environmental and nature protection organizations, energy companies, local and regional authorities and other parties, the total percentage of renewable energy has to be 14% in 2020 and 16% in 2023. To accomplish these objectives the Energy Agreement contains arrangements to further increase the number of offshore wind parks up to a total capacity of 4,450 MW in 2023 and 6,000 MW in 2020.

This newsflash provides an update of our wind energy newsflash released in May 2012 and gives a brief overview of recent developments of legislation and policy relating to offshore and onshore wind energy.

Offshore wind energy

Wind parks in operation and under construction

In the Netherlands there are currently two offshore wind parks in operation: the Prinses Amaliawindpark at approximately 22 km off the shore of IJmuiden and the Offshore Windpark Egmond aan Zee (OWEZ) at approximately 15 km off the shore of Egmond aan Zee. These wind parks together have a total capacity of 228 MW. The parks were developed in the so-called 'first round' with a subsidy under the MEP scheme (Environmental Quality Electricity Production), the predecessor of the Sustainable Energy Incentive Scheme (referred to as: "the SDE"), which was transformed into the SDE+ scheme in 2011 (referred to as: "the SDE+").

In the 'second round' SDE subsidies have been granted in May 2010 to the German company Bard to construct the Gemini wind parks Buitengaats and ZeeEnergie 55 km north of Schiermonnikoog. The project was sold by Bard in 2011 and is momentarily owned by the Dutch investment company Typhoon Offshore for 90% and for 10% by the Dutch waste to energy company HVC. Typhoon Offshore has announced that upon financial close it will sell its shares to the Canadian company Northland Power (60%), Siemens Financial Services (20%) and Van Oord Dredging and Marine Contractors (10%). The construction of the Gemini project should start in 2015 and is expected to be fully operational in the summer of 2017. The Gemini wind parks will have a total capacity of 600 MW.

The remainder of the available SDE subsidies of the second round was awarded to Eneco for the construction of wind park Luchterduinen (previously known as Q10) at about 23 km off the shore of Noordwijk. The wind park will have a capacity of 129 MW and will be built in cooperation with Mitsubishi Corporation. The construction of the wind park started in October 2013. Commercial operation is expected to take place in 2015.

During the second round nine other permits for offshore wind parks were granted. However, because no subsidies were allocated to these projects, none of these wind parks are being built. These permits have however in principle been extended until 2020, in order for the holders of these permits to participate in the upcoming tender procedure for the so-called 'third round'.

Third round: tender procedures commencing in 2015

The Energy Agreement is regarded to be an important step forward in the development of offshore wind energy. Pursuant to this agreement offshore wind energy capacity has to be increased to 4,450 MW in 2023, which is less than the original objective of 6,000 MW in 2020. Consequently, a total extra capacity of 3,450 MW has to be constructed and taken into operation ultimately by 2023. On the assumption that the average capacity of a wind park amount to 300 MW – 350 MW, this would mean that 10 -12 new wind park would have to be built. For this purpose, a new tender trajectory will commence in 2015. As of 2015, for a period of five years, phased tender procedures will take place using the latest cutting-edge technology and assuming continuous cost reductions: 450 MW in 2015, 600 MW in 2016, 700 MW in 2017, 800 MW in 2018 and 900 MW in 2019. Apart from these tender procedures, a new innovative demonstration wind park will be constructed in 2014. This park will serve to test, implement, demonstrate and prove Dutch offshore wind energy innovations and thereby reducing the costs of offshore wind energy with 40% in 10 years time. Such reduced costs will be factored into the tender procedures. The subsidy calculations will be based on the assumption that the costs will be reduced with 5 EUR/MWh/year, starting in 2014 at 150 EUR/MWh. It is acknowledged that these cost reductions may not be achieved because of the fact that some offshore locations could be more expensive than other locations. This will especially apply to locations that will be developed after 2020. Should this be the case, the location and the relating costs will be taken into account in determining the required cost reductions.

On 20 March 2014 the Minister of Economic Affairs and the Minister of Infrastructure and Environment published their draft bill for a new offshore wind act. This draft bill introduces a so-called plot decision (kavelbesluit). Offshore wind parks may only be constructed on locations designated so by a plot decision. Such plots are designated within one of the designated areas of the National Water Plan (referred to as: "the NWP"). Permit applicants no longer have to make an assessment of nature aspects pursuant to the Birds and Habitats Directive, because the Dutch government has integrated these aspects into the plot decision. Costs incurred by the government in relation to such assessment will however be borne by the party that wins the tender in relation to such plot. The plot decision furthermore contains terms and conditions regarding the construction and operation of the wind park and the connection of the wind park to the grid. A permit will only be granted if the construction of the relevant wind park is finished within four years after receipt of the permit (as has been agreed in the Energy Agreement). The Energy Agreement also obliges the relevant parties to use the most up-to-date technology. In consultation with market participants the most current information regarding the technology will be included in the plot decisions. The Uniform Public Preparatory Procedure of the General Administrative Law Act (AWB) is applicable on the adoption of a plot decision.

Ultimately, a tender process will determine to whom a permit is granted to build an offshore wind park on a certain plot. After winning a tender procedure, the permit holder will submit a development plan which will detail a construction plan for the wind park. The development plan will not be subject to objection or appeal. As long as subsidy is required for the construction of offshore wind parks, the permit procedure will coincide with the subsidy procedure.

The Minister of Economic Affairs has indicated that a total of 18 billion euros in subsidies will be made available for the construction of offshore wind parks. Taking into account the above mentioned tender trajectory and the obligation of parties to develop the wind parks within four years, the subsidy funds should be fully committed to by 2020. How the tender procedures of the third round will be implemented is yet unclear. This will be elaborated on in an amendment of the SDE+ regulation. Pursuant to the Energy Agreement the legislative framework for offshore wind parks has to be ready ultimately by 1 January 2015.

Designated areas for offshore wind

The Minister of Economic Affairs and the Minister of Infrastructure and the Environment have allocated two areas for the construction of offshore wind parks in the 2013 draft spatial structure vision offshore wind energy (referred to as: "the Structure Vision Offshore") for the permits in the third round. The relevant areas are Hollandse Kust, an area of approximately 1,225 km2, and Ten Noorden, an area north of the West Frisian isles of approximately 200 km2. The Structure Vision Offshore is a revision of the NWP in which two areas had already been allocated for the construction of wind parks: the areas Borssele (about 344 km2) and IJmuiden Ver (about 1,170 km2). The four designated areas offer a total capacity of over 17,500 MW (assuming a 6 MW per km2 ratio). Outside the designated areas no permits will be allowed for the construction of offshore wind parks. Though these areas may offer more capacity than necessary, this is deemed necessary because conflicting interests with other offshore activities are likely to reduce the designated areas to smaller areas. Both Ministers expect to implement the final Structure Vision Offshore mid 2014.

The four designated areas lie behind the 12-mile zone (the zone 22 km off the Dutch shore). Currently a feasibility study is being executed to assess the spatial possibilities for wind energy within the 12-mile zone. The government aims to inform the Dutch Parliament early 2014 about the results of the feasibility study. If it will be decided to allow construction of wind parks within the 12-mile zone, the NWP will have to be revised accordingly.

Offshore grid

Currently the construction of the connection between the offshore wind park and the electricity grid is for the account of the wind park operator if the length of the connection exceeds the standard length. Such costs are relatively high.

In the Energy Agreement it has been decided to construct an offshore grid where such grid will be more efficient than a direct connection between offshore wind parks and the national electricity grid. With the term offshore grid the Energy Agreement refers to an electricity grid structure for several offshore wind parks. According to the draft bill for the new offshore wind act TenneT, the Dutch TSO, will be responsible to prepare the spatial planning for the construction of the offshore grid. The costs involved in such preparation works will, with retroactive effect, be included in the transmission tariffs. The allocation of the costs for the actual construction of the offshore grid and the the ownership and the management of the offshore grid will be dealt with in another legislative proposal.

TenneT is currently already active in the German North Sea to connect offshore wind parks to the German electricity grid. The first connection was constructed in 2009 for the wind park Alpha Ventus (60 MW), 45 km off the shore of the isle Borkum and for the wind park Borwin 1 (400 MW), 125 km off the shore. Eight other connections are currently under construction. These wind parks are connected in so-called clusters. It is expected that until 2019 TenneT will in Germany have realised thirteen grid connections with a total capacity of 8 GW. In Germany the construction of connections for offshore wind parks is a legal duty for a TSO, such as TenneT. The United Kingdom however uses a different system. In the United Kingdom developers of offshore wind parks can choose to construct the grid connection themselves and upon completion transfer such connection to an offshore grid-manager, a so-called Offshore Transmission Owner (OFTO). Alternatively, they can also choose to directly outsource the grid construction to an OFTO. OFTO's are selected in tender procedures by the British supervisor Ofgem. With the competitive nature of the OFTO-model expectations Ofgem aims to reduce grid connection costs.

In its Quality and Capacity Report of 2013, TenneT indicates that given the long lead time for the construction of necessary grid enforcements it will be important to have clarity as soon as possible on the timing and location of the wind parks. This information is expected to be provided in the course of 2014 after a decision will be made on the design and preconditions for an offshore grid.

Top Sector Energy and the Innovation contract

The Dutch government has appointed nine Top Sectors in which the Netherlands have a strong worldwide position. For these sectors a policy agenda has been developed to preserve and strengthen this position. The Top Sector Energy is one of these sectors and aims to develop a long-term energy and innovation policy in order to strengthen the Dutch energy sector. The Top Sector Energy is amongst others responsible for the implementation of the energy innovation objectives as set out in the Energy Agreement. For 2014 the Minister of Economic Affairs has committed to a budget of 135.5 million euros for the Top Sector Energy.

The Top Sector Energy consists of seven Top Consortia for Knowledge and Innovation (referred to as: "TKI's"), including the Consortium 'Wind op Zee' (referred to as: "TKI Offshore Wind"). In March 2012 the TKI Offshore Wind has developed an Innovation Contract for Offshore Wind on the basis of a so-called Green Deal that was entered into between the Dutch government and the Dutch Wind Energy Association (referred to as: "the Innovation Contract") to test innovations in order to achieve cost price reductions. The TKI Offshore wind is responsible for the implementation of the Innovation contract and intends to accomplish this through the development of an R&D program in close cooperation with the energy sector and through the development of strategic projects and the development of a demonstration wind park for the implementation, testing and demonstration of Dutch innovations.

The TKI Offshore Wind has a certain subsidy budget at its disposal. Under the aforementioned R&D program, parties may through tender procedures organised by the Netherlands Enterprise Agency (Rijksdienst voor Ondernemend Nederland) submit projects proposals in relation to certain innovation themes.

Onshore wind energy

Installed onshore capacity and ambition

According to the Dutch government onshore wind energy can substantially contribute towards achieving the national objectives as set out in the Energy Agreement since wind energy on land is considered a relatively inexpensive technique. Pursuant to the Energy Agreement the Dutch government aims to have 6,000 MW of onshore wind capacity installed by 2020. In 2013 300 MW of new wind capacity was realised on land. This has been the largest increase of wind capacity since 2008. Currently the total installed capacity of onshore wind in the Netherlands is 2,465 MW. Consequently, by 2020 an additional capacity of 3,535 MW must be realized to meet the objectives set out in the Energy Agreement.

Designated areas for onshore wind

The Energy Agreement refers to the commitments entered into by the Dutch government and the Association of Provincial Authorities (IPO) in January 2013 in order to achieve the onshore wind objectives for 2020. As part of these commitments the 12 Dutch provinces have agreed to make sufficient space available for the realization of 6,000 MW of onshore wind capacity by 2020. On 28 March 2014 the final spatial structure vision onshore wind energy (referred to as: "the Structure Vision Onshore") was published in which the Ministers of Infrastructure and Environment and Economic Affairs have designated the following 11 areas for the construction of large-scale onshore wind parks until 2020: Eemshaven, Delfzijl, N33 (at Veendam), Drentse Veenkoloniën, Wieringermeer, IJsselmeer Noord, Flevoland, Noordoostpolderdijk, Rotterdamse Haven, Goeree-Overflakkee and Krammersluizen. These abovementioned designated areas mainly consist of windy, rural areas with a relatively low population density. The province of Flevoland provides the largest contribution to achieving the onshore wind objectives, with a wind capacity of 1,390.5 MW.

Large-scale wind parks

Large-scale wind parks of more than 100 MW are subject to the National Coordination Regulation (Rijkscoördinatieregeling). Under this regulation procedures can under governmental coordination be shortened and streamlined in order to accelerate the development of projects.

One of the largest onshore wind parks in the Netherlands, wind park Zuidlob in Zeewolde, has been operational since September 2013. It has 36 turbines and a total capacity of 122 MW. In August 2013 construction works have started for another large scale wind park, wind park Noordoostpolder, with a capacity of 450 MW. In a positive decision of the Council of State in June 2013 regarding the implementation plans for the third construction phase of this wind park all appeals were declared inadmissible or unfounded and the path has been cleared for the construction of the wind park, which is expected to be fully operational early 2016. In addition, several other large onshore wind parks are currently being developed: wind park N33 in Veendam (over 130 MW), wind park Drenthe's Monden (300-450 MW) in the municipality of Borger-Odoorn and wind park Oostermoer (120-150 MW) in the neighbouring municipality of Aa en Hunze.

Wind parks below 100 MW

The provinces are each individually responsible for a spatial structure vision to accommodate wind parks with a capacity below 100 MW. All provinces will publish in 2014 a Provincial Structure Vision in which they will designate areas for the construction of small-scale onshore wind parks with a capacity below 100 MW until 2020. These small-scale wind parks must also be realized to meet the objectives set out in the Energy Agreement.

Sustainable Energy Incentive Scheme (SDE+)

On 1 April 2014 the annual application period for the SDE+ subsidy has started. This is the fourth year that SDE+ subsidy is made available since its predecessor, the SDE subsidy, was transformed into the SDE+ subsidy. In 2014 a budget of 3.5 billion euro is available for SDE+ subsidy in relation to the national renewable energy objectives of 14% by 2020 and 16% in 2023.

The SDE+ is a variable premium feed-in scheme, that aims to compensate the difference between the productions costs of renewable electricity, heat and green gas (the basic amount) and the market price. For 2014 the scheme itself remains unchanged. One subsidy cap is established for all renewable energy options and the scheme is opened in different phases whereby cheaper techniques will be given priority. In each phase a free category will be provided for with a basic amount (cost price/kWh) that is equal to the maximum basic amount for that phase. This enables an applicant to realise a project with a lower basic amount than the amount calculated for the production category concerned. As of 2013 the SDE+ provides for a system of wind differentiation. This means that the conditions applicable to windy locations differ from the conditions applicable to locations with less wind. Since a wind turbine that is located on a less windy location will be able to make less "full load hours" (vollasturen), for such locations a higher basic amount will be made available.

Following the Energy Agreement this year a number of changes have been made in the SDE+. For example, in 2014 it is no longer possible to accumulate the SDE+ subsidy and the Energy Investment Allowance (EIA).

In 2013 598 applications for SDE+ have been awarded, constituting a maximum total subsidy budget of almost 2.8 billion. These applications included 62 applications for onshore wind projects, with a maximum total subsidy amount of 609 million euros.

Crisis and Recovery Act

Permanent effect

The Crisis and Recovery Act includes provisions for accelerating infrastructure projects, as well as projects relating to sustainability, energy, and innovation. In addition to generic measures that aim to accelerate projects and therefore are relevant for wind energy projects, the Act also includes specific provisions regarding wind energy. The Act aims to combat the economic crisis and to promote the long-term recovery of the economic structure of the Netherlands. In view of this objective, initially the Act would apply only temporary and should have expired on 1 January 2014. However, in order to give the measures included in the Crisis and Recovery Act a permanent place in administrative and environmental law, the Act has been granted permanent effect as of April 2013.

Radar stations

One specific issue that arises in relation to the construction of wind parks is interference with the radar stations of the Ministry of Defence. 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). In case of interference caused by a wind park the advice of the Ministry of Defence will need to be requested. Because this will delay the construction of wind parks, the Decree on General Rules for Spatial Planning as of 1 October 2013 provides for the possibility to introduce a more flexible procedure by ministerial regulation. As of the same date the Regulation General Rules for Spatial Planning was changed and now includes building restrictions within radar interference areas, including conditions regarding the height of the tips of the turbine blades.

Contact

The above overview is intended to provide an overview of the latest developments in wind energy. It is not intended to be a complete enumeration of all new legislation and regulations. If you have any questions or remarks regarding this newsflash please do not hesitate to contact us.