Live-streaming from an electrical, carbon fibre catamaran, Norwegian Prime Minister Jonas Gahr Støre and Minister of Petroleum & Energy Terje Aasland announced today the long awaited first tender process for offshore wind. This first round, catering for approximately 3 GW of offshore wind, is the first step towards the Norwegian government's long-term ambition to allocate areas for 30 GW offshore wind by 2040.
A number of offshore wind consortia have been established in anticipation of this first round and we expect to see fierce competition over the four project areas up for award. The successful bidders will get time-limited, exclusive rights to carry out impact assessments and to subsequently apply for offshore wind licenses in the respective project areas.
The largest project area is situated in Sørlige Nordsjø II, an area suitable for bottom-fixed as well as floating turbines. This project area will be awarded following an auction between six to eight applicants to be pre-qualified later this year.
Three smaller project areas, situated in Utsira Nord, are suitable for floating wind only, due to water depths. The areas will be awarded based on qualitative criteria. In the public consultation papers issued back in December 2022, one of the alternatives proposed was to invite the top six Utsira Nord applicants to perform one year of maturation studies and subsequently award project areas to three of them. The industry was however mainly negative to such a process and today’s announcement shows that the Ministry has not proceeded with such model.
Overview of the areas to be awarded
State aid – Contracts for Difference (CfD)
State aid is expected to play a key role, especially for floating wind.
State aid at Sørlige Nordsjø II will be given as a 15-year, two-way CfD on monthly power prices for 1,400 MW, capped at NOK 15 billion over the period. In a nutshell, the prequalified bidder requesting least aid per kWh will be awarded the area.
In respect of Utsira Nord, the Ministry previously proposed to award three project areas but grant state aid to only two of the projects. This was heavily criticised by the industry, but the industry has not been heard at this point. A competition for state aid will thus be held following maturation and impact assessment of the three projects selected. The project that does not receive state funding will most likely retain the right to the area for an extended period of time and may participate in possible future competitions and/or seek alternative funding. Also Utsira Nord state aid is expected to be granted in the form of a 15-year, two-way CfD.
All state-aid is subject to approval by the Norwegian parliament and the EFTA Surveillance Authority ESA.
Grid
The offshore wind parks to be established will be connected to the national grid on the Norwegian mainland (Kvinesdal/Nye Mosby stasjon for Sørlige Nordsjø II; Karmøy/Gismarvik/Spanne for Utsira Nord).
In the next licensing round, expected in 2025, we may also see hybrid grid connections. This is however depending on the outcome of ongoing political discussions. The Prime Minister in today’s announcement expressed a long-term goal to establish a North Sea grid.
Award criteria & allocation model
Timeline
Further information in English can be found here. The competition documents (Norwegian only) can be accessed here.
