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Legal developments in wind energy in the Netherlands

22/12/2009

Introduction

In 2009 the Dutch wind energy market reached a total installed capacity of 2,221 MW, contributing about 4.5 per cent of the electricity demand in the Netherlands. Two realised offshore wind parks in the North Sea, the Prinses Amaliawindpark and the Offshore Windpark Egmond aan Zee, provide a total capacity of 228 MW. In order to meet the Dutch climate change objectives the Minister of Economic Affairs ('MEA') is committed to increase the offshore wind capacity with another 950 MW during this cabinet period and plans to commit to a total installed capacity of 6,000 MW in 2020. For onshore wind energy these targets include 2,000 MW extra until 2012 and another 2,000 MW until 2020. In order to meet these targets the Dutch government issued several legislative and policy measures in the past year. This news flash gives a brief overview of the main measures and their status.

Priority for wind energy on the grid

Renewable Energy Directive
The new Renewable Energy Directive 2009/28/EC of 23 April (the 'Directive') imposes the obligation on Member States to provide priority or guaranteed access to the national grids and guaranteed transmission and distribution for electricity produced from renewable energy sources, e.g. wind energy. In anticipation of the implementation of the Directive the MEA issued a ministerial decree on 20 May providing grid operators the authority to constrain off generators in congestion areas to make more sufficient use of transport capacity. In addition, on the basis of this ministerial decree, all connected parties receive equal rights on transport regardless the date of connection, allowing new wind energy production capacity to be connected without limitations on transport capacity.

Priority for Renewable Bill
To implement the priority for transmission and distribution of renewable electricity, the MEA published a bill on 27 March imposing an obligation on the grid operator to apply congestion management in the event of congestion (shortage of transport capacity) on the grid and to provide priority transport for renewable electricity (the 'Priority for Renewable Bill'). At present congestion already takes place in the Westland area and is expected in the areas of Eemshaven and Maasvlakte. The Priority for Renewable Bill only covers the outlines, the further substantiation will be laid down in a governmental decree, which is expected in Parliament at the beginning of 2010.

Governmental decree
The MEA informed Parliament by letter of 16 November, about the main elements of this governmental decree. It will introduce, amongst others, an order of priority for renewable electricity production. Electricity from wind energy is ranked the highest priority together with solar, water, manure-based biogas plants and waste incineration plants. Generators of wind electricity will therefore only be forced (or allowed for that matter) to take part in the system of congestion management in last resort, when generators of the same priority ranking cause congestion. The governmental decree will also give more information on the congestion management system that will be based on implicit redispatch of production capacity via an auction mechanism. Furthermore, the governmental decree will determine via an assessment on reasonableness and proportionality whether in a certain situation congestion management shall be applied.

Support for wind energy projects through crisis measures

European and national subsidies for offshore wind energy
In reaction to the financial and economical crisis both on an European as well as on a national level recovery measures were announced. On an European level, the European Energy Programme for Recovery of 13 July ('EEPR Programme') proposes a contribution to eligible projects listed in the annex to the EEPR Regulation. The development of a North Sea grid is one of these eligible projects, with an envisaged contribution of 165 million euro. On 9 December the European Commission approved subsidies to the amount of 565 million euro to nine offshore wind energy projects, among which a subsidy of 86.54 million euro to Cobra, the undersea electricity cable to be installed on the seabed between the Netherlands and Denmark. As part of national crisis measures, on 25 March the Dutch government announced to grant additional subsidies to an extra 500 MW offshore wind energy on top of the 450 MW scheduled for this cabinet period, making the total eligible capacity for offshore wind energy 950 MW until 2012.

Crisis and Recovery Bill
In addition, on 15 September, the Council of Ministers introduced a bill ('Crisis and Recovery Bill') to accelerate administrative proceedings and decision making for projects regarding sustainability, accessibility and (house-) construction in favour of employment. The MEA expects that several onshore wind energy projects will profit from the measures in the Crisis and Recovery Bill. For offshore wind energy projects no acceleration is expected because the decision making for the short-term objective of 950 MW will already have taken place before the Crisis and Recovery Bill enters into force. On 18 November the Crisis and Recovery Bill passed in Parliament and was sent to the Senate. The Senate announced to require a preparatory study before it is ready for debate in the full chamber, therefore the effective date will not be 1 January 2010 as was originally scheduled for.

SDE-subsidy for onshore wind energy

The Sustainable Energy Incentive Scheme ('SDE') compensates the uneconomic top of renewable energy production. On 24 November the MEA announced the budget for the SDE in 2010 with respect to all production categories except offshore wind energy. For onshore wind energy a total capacity of 355 to 400 MW can be considered for SDE in 2010. Publication of the renewable energy production categories eligible for SDE in 2010 is expected at the end of December. In order to grant SDE to Noordoostpolderpark, the largest wind park in the Netherlands with a planned capacity of 429 MW, the MEA announced on 17 November the introduction of two new SDE production categories for large wind parks, with an estimated subsidy for 2009 of 880 million euros. Also an additional one-off subsidy in relation to the innovative character of the Noordoostpolderpark will be awarded, estimated on an amount between 104 and 116 million euros.

Participation in onshore wind energy

In August Senter Novem and CMS Derks Star Busmann published a report on forms of participation in wind energy projects. According to this report and a subsequent expert meeting, participation by locals in (small) wind energy projects can increase the level of public support for these projects. Although this is acknowledged by the MEA, it announced on 9 November - in response to the motion Samson in relation to ‘self-supply’(generation of electricity behind the meter) - that it does not want to expand the financial benefits of self supply (i.e. netting of electricity fed into the grid and electricity taken off the grid and exemption from energy tax for renewable energy) to cover situations of supply of electricity before the meter through participation of the consumer in a renewable energy project.

SDE-tender for offshore wind energy

The SDE conditions for offshore wind energy for 2010 were published on 24 November in the ministerial regulation on offshore wind energy 2009. The SDE-subsidy ceiling is 5.3 billion euros and will be available for about 950 MW, to be assigned via a tender procedure. Parties in possession of a permit for an offshore wind energy project pursuant to the State Water Works Management Act may apply for SDE subsidy in the period from 4 January until 1 March 2010. Such eligible party may apply by submitting a tender amount representing the required subsidy per kilowatt hour, for which it wants to exploit its offshore wind energy project. Per offshore wind energy project multiple applications can be submitted with variations in capacity size.

The selection of the winners takes place via a ranking starting from the lowest tender amount and up until the reserved budget is fully used. Solely for purpose of the ranking, a correction is made on each tender amount in relation to the distance of the wind park to the shore. In the event that equal tender amounts are submitted, a lottery decides their ranking. To make sure that the offshore wind energy projects will actually be realised, selected parties are obliged to sign an execution agreement including a 20 million euro bank guarantee. The offshore wind parks should be taken into operation within five years after the subsidy decision becomes definitive. For the remaining MW’s of offshore wind energy to meet the MEA’s target of 6000 MW in 2020, the MEA envisages to introduce concessions instead of the current system of permits, a bill to this effect is expected next year.

North Sea grid?

The MEA currently investigates the possibility of the construction of an offshore grid in the North Sea to connect the envisaged 6.000 MW of offshore wind production capacity in 2020. On 12 June 2009 the MEA published the report 'Net op zee'. According to the report the costs of construction, maintenance and control of the possible grid configurations are currently estimated between 5 and 11 billion euros over a period of 20 years. The actual costs depend to a large extent on the chosen design, the location and the distance to the shore. The MEA considers assigning the responsibility of the construction and control of the North Sea grid to transmission system operator TenneT TSO B.V. ('TenneT'). This would require an amendment of the Electricity Act 1998 to extend the applicability of this act, or parts thereof, to the Exclusive Economic Zone (EEZ).

The MEA now awaits further advice from TenneT, ECN and the Ministry of Finance on the allocation of the costs to generators, grid operators, users and the government, before making a decision. In anticipation of this decision the MEA requested TenneT to continue its preparatory activities in order to timely connect the future offshore wind parks. Before the end of this year the Parliament will be further informed. Apart from this national initiative, a joint plan by the Netherlands, Belgium, Luxembourg, France and Germany to improve connection of offshore wind turbines to the grid is expected at the end of this year.

Taskforce offshore wind energy

On 9 December 2009, the MEA installed the Taskforce offshore wind energy (Taskforce windenergie op zee) (the 'Taskforce'). The Taskforce will advise the MEA on the 'business case' offshore wind energy and on an optimal cooperation between the government and the industry to realise the objective of 6,000 MW in 2020. The National Water Plan (Nationaal Waterplan) and the SDE form the basis for its advice. The final report is due on 1 April 2010 and an interim report is expected shortly, before 25 December.

What next?

The legal developments in wind energy are in full swing. At the start of 2010 we can expect a debate in Parliament on the Bill Priority for Renewable and the soon to be published governmental decree providing the conditions and the system for congestion management, which should be implemented by the end of 2010. Meanwhile, the Senate will be busy with the Crisis and Recovery Bill, which is already behind on schedule. The SDE for 2009 including the extra categories with respect to the wind park Noordoostpolderpark will be published by the end of this year and is likely to cause more debate in Parliament. Around the same time the SDE for 2010 will be published. In relation to offshore wind energy, MEA's proposal for a North Sea grid and the first report of the Taskforce are expected at the end of this year. Furthermore, at the start of 2010 the SDE tender will kick off and the winners will be announced in May 2010. In addition, we can expect the bill on offshore wind concessions. We will keep you informed on further developments.

If you have any questions or remarks regarding this news flash please do not hesitate to contact:

Cecilia van der Weijden
Jacqueline Feld

Authors

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