Netherlands Enterprise Agency runs informative session on offshore wind tenders - Hollandse Kust (zuid) I and II, and Borssele Innovation Site V

On 1 November 2017, the Netherlands Enterprise Agency (RVO Nederland) organized an informative and well-attended information session about new offshore wind tenders for Hollandse Kust (zuid) I and II, and Borssele Innovation Site V. It explained the subsidy-free tender for Hollandse Kust (zuid) sites I and II and addressed the way in which subsidy and a permit will be tendered for Borssele Innovation Site V.

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

In his last act as Minister of Economic Affairs, Henk Kamp secured and announced that the upcoming tender for Sites I and II of the Hollandse Kust (zuid) Wind Farm Zone will – following the German precedent for the first time in the Netherlands, be without subsidies. The lowest subsidy will no longer be the deciding factor for granting the wind permit. Tenders will now be evaluated on the basis of six other quality criteria: (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.

A team of independent experts, whose names will not be published (to prevent the potential interference by market parties), will be appointed to assess these criteria. Interested parties may submit a tender for a subsidy-free wind farm permit for one or both of the sites between 15 and 21 December 2017.

Tenderers wishing to apply for a permit for both sites must submit separate applications/tenders for each site. This requirement raised many questions during the information meeting. For instance, the application form allows tenderers to indicate that they wish to submit a dual bid, and to include information on the economies of scale that relate to quality criteria (iv), (v) and (vi); however, the use of separate application forms for each site assumes that dual bid-tenderers have tendered for separate sites and requires the provision of significant information that seems not relevant in case of a dual bid. The meeting did not resolve this issue.

In addition, questions concerning the role of the information on economies of scale (unavailable for single bids), and regarding the possibility that a dual bid-tenderer may be awarded a permit for only one of the sites, were left unanswered. This aspect of the tender procedure appears to need further consideration. During the meeting, the Netherlands Enterprise Agency announced that it would address these issues on its website in the Q&A section.

Also the content of the wind permit and the amount of detail regarding the results of the tender that tenderers will be informed of are still unclear. For instance, tenderers do not know whether or to what extent they will be given insight into the allocation of points with respect to the applications, and whether the winning tenderer’s allocation of points will be substantiated. Additionally, it was announced that the "Policy Rule concerning a change to power generation facilities for offshore wind" will be amended to clarify the requirements needed to obtain an exemption for essential changes in a project plan post permit-award.

Because no subsidy is involved, the winner(s) of the tender will not need to provide a bank guarantee, however to ensure the wind farm(s) are realised in accordance with the permit, the Minister will instead have the authority to impose an order where non-compliance will be subject to a penalty.

The meeting also addressed what will occur if no acceptable bid is submitted; in that case, a substitute tender procedure, including subsidy, will start mid-January 2018. This substitute tender, including subsidies, will be comparable to the previous tenders for 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 to: (i) create an opportunity for Netherlands based companies to demonstrate highly-developed technologies before actual market introduction; (ii) contribute to the cost reduction of offshore wind energy; (iii) contribute to the Dutch economy through expansion of the market and Dutch company export potential; and (iv) contribute to knowledge building in the Netherlands by involving Dutch SME's and Dutch knowledge institutions.

The innovation site has a capacity (connection to TenneT's platform beta) of between 6 and 20MW. 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.

The Ministerial Order for Innovative Offshore Wind Energy 2017 (Regeling innovatieve windenergie op zee 2017) sets out four quality criteria, to assess the applications: (i) contribution to cost reduction of offshore wind farms;(ii) contribution to the Dutch economy;(iii) 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) 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.

Again, when assessing tenders against these quality criteria, a team of independent experts, whose names will not be published, will be appointed.

The amount of subsidy requested by a tenderer will only be relevant in cases where there is more than one project attaining the highest score on these quality criteria. In that case, the winner will be the tenderer who has requested the least investment subsidy, or, if that number is equal too, the winner will be determined by lottery.

Two subsidies will be available: an investment subsidy and an operation subsidy. The operation subsidy relates to the produced amount of kWh and is limited to EUR 44 million. The amount of the investment subsidy will be determined by 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 this will be limited to EUR 15 million, in accordance with the General Block Exemption Regulation.

Discussions arose during the information meeting about the reality of this subsidy, because its amount is based on the investment costs of Borssele III (a regular commercial wind farm), rather than an innovation site. Despite these discussions, this policy will remain in place.

Additionally, the clarifying amendments made to the "Policy Rule concerning a change to power generation facilities for offshore wind" will hopefully provide further information to tenderers about the way in which, and the extent to which they can change their project plan after the tender award. Contrary to the Hollandse Kust (zuid) sites, bank guarantees will be required for the innovation site.

Conclusion

Both tenders are innovative with an increased focus on quality compared to earlier offshore wind tenders. We will keep you informed as the discussed uncertainties relating to these tenders are clarified.