Offshore wind tenders Hollandse Kust (zuid) I & II and Borssele Innovation Site V - the information meeting

On 1 November 2017 the Netherlands Enterprise Agency (RVO Nederland) organized an information meeting about the new offshore wind tenders for Hollandse Kust (zuid) I & II and Borssele Innovation Site V. The morning session addressed Borssele Innovation Site V, for which SDE+ subsidy and a permit are tendered. In the afternoon the subsidy-free tender for Hollandse Kust (zuid) sites I & II was explained. Both sessions were well attended and informative.

Subsidy-free tender for Sites I and II of the Hollandse Kust (zuid) Wind Farm Zone

As a last act as Minister of Economic Affairs, Henk Kamp achieved that the upcoming tender for Sites I and II of the Hollandse Kust (zuid) Wind Farm Zone will, for the first time in the Netherlands, open without subsidies – thus following the German precedent. As the lowest subsidy will no longer be the deciding factor for granting the wind permit, tenders will be evaluated on the basis of six other – quality – criteria set out in the Offshore Wind Energy Act (Wet windenergie op zee) and – in more detail – in (the annex to) the new Ministerial Order for Offshore Wind Energy (Regeling vergunningverlening windenergie op zee). The criteria that will be considered – and that tenderers will have to address in their bids – are: (i) the knowledge and experience of the parties involved, (ii) the quality of the design for the wind farm, (iii) the capacity of the wind farm, (iv) the public costs / efficiency of the wind farm, (v) the identification and analysis of the risks involved by the tenderer, and (vi) the measures that the tenderer will take to safeguard cost-effectiveness. For assessing the tenders on the basis of these quality criteria, a team of independent experts will be appointed. The names of these experts will not be published to prevent potential interference of market parties.

Interested parties may submit a tender for a wind permit for a subsidy-free wind farm for one or both of the sites from 15 until 21 December 2017. Tenderers that wish to apply for a permit for both sites have to put in separate applications / tenders for each site. These separate applications for a dual bid raised many questions during the information meeting. Although the application form allows tenderers to indicate that they wish to submit a dual bid and allows them to include information on the economies of scale in relation to aforementioned quality criteria (iv), (v) and (vi), the use of separate application forms for each of the sites requires dual bid-tenderers to provide a lot of information on the basis of the assumption that they tender for a single site. During the meeting it did not become clear how this issue should be addressed. In addition, questions were left unanswered on the role of the information on economies of scale (which is not available for single bids) and the possibility that a dual bid-tenderer is awarded a permit for only one of the sites. It therefore seems that this aspect of the tender procedure needs further consideration. During the meeting the Netherlands Enterprise Agency announced that it will address these issues in the Q&A on its website.

Other information that is still to be revealed includes the content of the wind permit and to what detail tenderers will be informed about the results of the tender (e.g. whether and to which extent the tenderers will post permit-award be given insight in the allocation of points with respect to the applications and whether the allocation of points to the winning tenderer will be substantiated). In addition, it was announced that the "Policy Rule concerning a change to power generation facilities for offshore wind" will be amended to provide more clarity on the requirements to obtain an exemption for essential changes in the project plan post permit-award.

Because no subsidy is involved, the winner(s) of the tender will not be asked for a bank guarantee. To make sure the wind farm(s) will be realized according to the permit, the Minister will instead have the authority to impose an order subject to a penalty for non-compliance.

In the event no (acceptable) bid is submitted, a "plan B" is already standby. In that case, a tender procedure including subsidy will be started in mid-January 2018. This substitute tender including subsidies will be comparable to the previous tenders for the wind farms in the Borssele Wind Farm Zone.

Tender Borssele Wind Farm Site V, the Innovation Site

On 2 January 2018 the tender for Borssele Wind Farm Site V will open. Interested parties for this innovation site – with subsidy – can submit their tender / application until 18 January 2018. The main goals of this tender procedure are:

• (i) to create an opportunity for Netherlands based companies to demonstrate highly-developed technologies before actual market introduction;
• (ii) to contribute to cost reduction of offshore wind energy;
• (iii) to contribute to the Dutch economy through expansion of the market and (export) potential for Dutch companies; and
• (iv) to contribute to knowledge building in the Netherlands by involving Dutch SME's and Dutch knowledge institutions.

The innovation site has a maximum capacity (connection to TenneT's platform beta) of 20 MW with a minimum of 6 MW. New innovations can be found in a large spectrum of technological developments, including wind turbine technology, foundations, installation methods and equipment, operation and maintenance methods and decommissioning.

In the Ministerial Order for Innovative Offshore Wind Energy 2017 (Regeling innovatieve windenergie op zee 2017), four quality criteria are set out on the basis of which the applications will be assessed. These are: (i) the contribution to cost reduction of offshore wind farms, (ii) the contribution to the Dutch economy, (iii) the degree of innovation of the project compared to international standards of research and technology and the boost the project will give to the knowledge position of the Netherlands, and (iv) the project quality, as evidenced by the detailing of the approach and method, risk handling, feasibility, the participating parties and the degree to which the available resources can be deployed more effectively and efficiently. The amount of subsidy the tenderer requests will only be relevant in case there is more than one project with the highest score on these quality criteria; in that case the winner will be the tenderer that requests the least investment subsidy. If that number is equal too, the winner will be determined by lottery.

For assessing the tenders on the basis of these quality criteria, a team of independent experts will be appointed. The names of these experts will not be published to prevent potential interference of market parties.

There are two subsidies: an investment subsidy and an operation subsidy. The operation subsidy is related to the produced amount of kWh with a maximum of EUR 44 million. The amount of investment subsidy depends on the investment costs, related to the investment costs of Borssele site III, and whether the applicant is a small, medium sized or large company. SME's will receive a higher percentage of their investment costs than large companies, but never more than EUR 15 million (maximum subsidy based on the General Block Exemption Regulation).

During the information meeting there was some discussion about the reality of this subsidy, since the amount is based on the investment costs of Borssele III, which is a regular (commercial) wind farm and not an innovation site. However, this policy choice has been made and will not change for this tender.

Also in relation to this tender the aforementioned amendments to the "Policy Rule concerning a change to power generation facilities for offshore wind" will be of interest, as will be more information on the way in which – especially to what detail – tenderers will be informed about the results of the tender. Contrary to the Hollandse Kust (zuid) sites, bank guarantees do apply for the innovation site.

Conclusion

Both tenders are innovative by itself and focus more on quality than earlier offshore wind tenders. It will be interesting to see what happens and whether all uncertainties will be clarified in time.