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CMS Guide to offshore wind in Northern Europe

Editors: Cecilia van der Weijden
 
Cecilia van der Weijden
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Dominique Voorst tot Voorst
 
Dominique Voorst tot Voorst
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Introduction
In 1991 the first offshore wind project was installed off the coast of Denmark. Over the past 25 years offshore wind has become an integral part of the European energy mix. More than 3 GW of new offshore wind capacity was commissioned in Europe during 2015. This has resulted in a cumulative installed capacity exceeding 11 GW at the end of 2015, most of which is located in the North Sea, making Northern Europe a frontrunner in offshore wind.

Recent tender awards in the Netherlands and Denmark show that offshore wind energy is rapidly improving its competitive position vis-a-vis conventional generation. Important structural cost reductions have been achieved and the industry’s cost reduction objectives for 2020 have been achieved well ahead of schedule.

Looking ahead, we see that many countries aim to increase their offshore wind capacity. The targets for the main offshore wind markets in Northern Europe – Belgium, Denmark, France, Germany, the Netherlands and the UK – add up to 20 GW in 2020. The North Sea is expected to remain the main region for offshore deployment in the coming years, with significant developments also foreseen in the Baltic Sea and the Irish Sea.

While there are similarities between some of these markets, there are also important differences, e.g. in terms of location-specific factors, such as distance from shore and water depth, and applicable legislation in relation to spatial planning, permit, subsidy mechanisms and grid connection. The CMS Guide to offshore wind in Northern Europe provides insight into the regulatory framework for offshore wind in Belgium, Denmark, France, Germany, the Netherlands and the UK. It is designed to assist in understanding the offshore wind sector across Northern Europe and highlights similarities as well as differences across the different jurisdictions.

The publication of this guide will take place in six phases. Each month a chapter on a certain jurisdiction will be made available on this webpage, starting with the Netherlands and followed by Denmark. Throughout the first half of 2017 France, Belgium, Germany and the United Kingdom will be published.

CMS has been, and continues to be, deeply involved in the development of offshore wind energy. We have worked on over 50 offshore wind projects in several jurisdictions, and have advised many leading companies in the sector on all aspects of offshore wind farms.

This guide is published in association with Bech-Bruun, Denmark’s largest law firm with a strong and highly specialized practice within offshore wind. We are delighted that Bech-Bruun has agreed to contribute the chapter on the Danish regulatory framework.

If you would like to receive more detailed information about the legal regime in a particular jurisdiction, please contact one of the authors of this guide, who will be happy to provide further
The Netherlands
1. Introduction
The Energy Agreement for Sustainable Growth that was entered into in 2014 between, inter alia, the Dutch government, environmental and nature protection organisations and energy companies, has been an important driver for the development of offshore wind parks in the Netherlands. While there was some activity in the field of offshore wind prior to the Energy Agreement, resulting in approximately 1000 MW offshore wind capacity in operation and under development1 , the Energy Agreement announced an increase in offshore wind energy capacity to 4,450 MW in 2023 in order to meet the Dutch renewable energy target of 16% in 2023.
Consequently, a total extra capacity of 3,450 MW has to be constructed and made operational ultimately by 2023. For this purpose, the Dutch State has developed a new legislative framework of phased tenders for subsidy and wind permits to take place in the period 2015-2019.
This process is strictly controlled by the Dutch government, setting parameters for, inter alia: the pace at which the proposed new capacity will be developed; the maximum capacity of the wind parks; planning and zoning; and the grid connection. An important prerequisite for the development of the additional offshore wind energy capacity is a 40% cost reduction over the period 2015-2019.
The below table provides the tender schedule and key parameters.

Tender yearDesignated area Capacity Maximum tender amount2 Base electricity price
2016 Borssele I & II 700MW EUR 0.124/kWh EUR 0.029/kWh
2016 Borssele III, IV & V3 700MW EUR 0.11975/kWh EUR 0.030/kWh
2017 Hollandse Kust (South) I & II 700MW EUR 0.1075/kWh -
2018 Hollandse Kust (South) III & IV 700MW EUR 0.10325/kWh -
2019 Hollandse Kust (North) 700MW EUR 0.10/kWh -

The first tender took place in April 2016. On 5 July 2016 the government announced that wind permits and subsidy for the development of wind parks on the sites Borssele I and II have been awarded to DONG Energy Borssele I B.V. for a strike price of EUR 0.073/kWh. With this strike price, the government’s 40% cost reduction requirement for the entire period up to 2019 was achieved in the first tender. The permits and subsidy for the wind park sites Borssele III and IV were awarded on 12 December 2016 to the consortium of Shell, Van Oord, Eneco and Mitsubishi/DGE for a strike price of 0.054/kWh.
2. Subsidy
2.1 General
The Sustainable Energy Incentive Scheme or SDE+ offers an operating (premium feed-in-tariff) subsidy for renewable energy. It compensates the difference between the production costs of renewable energy4 (the “base amount”) and the cost price for fossil energy (the “correction amount”). Accordingly, the amount of the SDE+ contribution depends on the correction amount and therefore on the evolution of the energy price.
The SDE+ subsidy decision reflects the maximum subsidy over the entire period of the subsidy (depending on the renewable technology being a period of 5, 8, 12 or 15 years). This maximum is determined based on the indicated capacity and the maximum number of full load hours for the relevant technology. The final subsidy payments are calculated per year, based on the actual amount of energy produced and the actual energy price.
Although the SDE+ scheme resembles the UK contract for difference, there are many differences. Two important ones, for example, are that in the Netherlands:
  • the premium is capped at a certain floor for the market price (referred to as the base price). Consequently, if the market price is below the base price, the difference will not be compensated in the subsidy
  • if the market price exceeds the reference price, the upside can be retained by the producer.

If the maximum production eligible for subsidy in a certain year has not been used, the remaining production capacity eligible for subsidy can be used in the following year. On top of the subsidy period of 15 years, another whole year can be taken to reach the remaining unused production eligible for subsidy, in effect stretching the subsidy period to a total of 16 years (forward banking). On the other hand, if production in a certain year exceeds the maximum production eligible for subsidy in that year, the excess production can be used in a following year if production is lower than expected in the later year, provided that this form of banking is restricted to no more than 25% of the annual production eligible for subsidy (backward banking).
No SDE+ subsidy is granted for renewable electricity fed into the grid in case of negative electricity prices over a period in excess of six hours.
2.2 Offshore wind subsidy
SDE+ subsidy for offshore wind parks is obtained through a tender procedure that is to be distinguished from the regular SDE+ programme. The SDE Decree and its General Implementing Regulations form the basis for the offshore subsidy tenders. In addition, for each tender a specific Ministerial Order is issued, containing further – to a large extent site specific – tender rules for the relevant sites.
At present Ministerial Orders for the first two tenders have been published: the Tender Regulation 2015 and the Tender Regulation 2016. Key issues addressed in these Tender Regulations include:
  • the timing of the tender
  • the duration of the subsidy period (15 years)
  • the deadline for commencement of operation (five years after the subsidy award)
  • the maximum tender amount and base electricity price (see table in section 1)
  • the minimum and maximum capacity of the wind park (for the sites Borssele I, II and IV: respectively 351 MW minus the number of MW of the turbine with the lowest capacity and 380 MW; for the site Borssele III: 331 MW minus the number of MW of the turbine with the lowest capacity and 360 MW)
  • tender eligibility criteria (see below)
  • criteria for ranking the bids (see below).

The subsidy tender procedure for offshore wind as set out in the SDE Decree and its subordinate regulations were approved by the European Commission as compatible aid. The individual subsidy decisions with respect to installed capacities in excess of 250 MW will not require notification to the European Commission under the state aid rules.
The subsidy application process is linked to the application procedure for the wind permits through the Offshore Wind Energy Act, which contains the key requirements in relation to the wind permits5. Wind permits will only be awarded to a party that has been granted SDE+ subsidy in the tender, aiming to ensure an efficient use of the sea.
2.3 Eligibility requirements
Subsidy applications must satisfy the below criteria. Applications that do not meet these requirements will be disregarded.
Financial feasibility

The development and operation of the wind park should be financially feasible. To determine whether this requirement is fulfilled, the applicant’s equity capital is required to equal at least 10% of the total investment of the wind park. The fulfilment of this equity capital requirement can be demonstrated by the most recent annual accounts of the applicant, its consortium partners or its parent company, as the case may be. The annual accounts may not date back more than three calendar years from the year of application.
For the fulfilment of this equity capital requirement the applicant may rely on its parent company (or in case of a joint venture, on the equity of one or more of its joint venture partners). A company under incorporation may rely on both the equity capital of its parent company and of its incorporator. A limited partnership may rely on the equity of the general partner and the general partner’s parent company (or parent companies). The 10% equity requirement only applies in relation to the period prior to the permit and subsidy award.
Unlike the Tender Regulation 2015, the Tender Regulation 2016 contains restrictions on the reliance on a parent company/joint venture partner(s). Pursuant to the Tender Regulation 2016 an applicant has to provide the written consent of its parent company/joint venture partner(s) and such parent company/joint venture partner(s) may not be relied on by more than two applicants. Pursuant to the explanatory notes to this Regulation, this has been introduced to avoid submission, for tactical reasons, of a large number of applications through different bidding entities.
The subsidy application must include a plan for the development and operation of the envisaged wind park, as well as a financing plan. If the applicant’s own assets amount to less than 20% of the investment required for the wind park, the applicant is required to provide a letter of intent from a financier in relation to the financing of the remaining part of the 20%.
Economic feasibility

A second requirement is economic feasibility. In order to determine whether the applicant meets this requirement it has to submit an income statement specifying the envisaged investment costs, project costs and benefits and the projected return during the subsidy period. In addition, the application must contain a wind energy generation calculation by a reputable independent organization, including the technical specifications of the wind park and the P50-value for the annual electricity production. The full load hours on the basis of the net P50-value constitute the maximum number of full load hours that are used to determine the annual number of kWh that is eligible for subsidy.
Start of construction

The application must include a time schedule, setting out a number of milestones (including the start dates for commencement of construction, operation and the subsidy period), demonstrating that it is possible for construction to start within four years after the date on which the wind permit has become irrevocable.
Achievability and technical feasibility

The applicant’s project plan should be “achievable” and “technically feasible”. It is felt that the bank guarantees required of the winning bidder under the implementation agreement6 with the Dutch State provide important comfort that the subsidy receiver meets these conditions.
Compliance with site decision

The application must comply with a so-called “site decision”, which is a new instrument, developed specifically for the offshore wind tenders. See Section 3.2 for detailed information on the site decision.
2.4 Ranking the applications
Eligible applications that meet the above requirements will be ranked on the basis of the tender amounts, with subsidy awarded to the application with the lowest tender amount. This means that per-site subsidy will be awarded to only one project. The Tender Regulations 2015 and 2016 however allow parties to submit three separate subsidy applications: for site I, for site II and a combined application for sites I and II jointly. In the event of multiple applications for one site by one applicant, all applications by that applicant for the site in question will be denied. The same applies in the event of multiple combined applications by one applicant: all combined applications will be denied.
A combined application is deemed to constitute one bid and will therefore either be rejected or awarded as a whole. The rationale is that it would otherwise not be possible to realise the envisaged synergy benefits. Although considered as one bid, a combined application must specify the tender amount per site and will only be successful if these tender amounts constitute the lowest amount for each of the sites.
2.5 Subsidy award
After the tender closure, the Minister of Economic Affairs will decide on the award within 13 weeks, which may be extended by a further 13 weeks. The tender award is subject to objection and appeal proceedings. Objections must be filed within six weeks of the date of the tender award. Subsequent appeals can be filed within six weeks of the date of the decision on the objection.
2.6 Implementation agreement and bank guarantees
The subsidy is awarded subject to two conditions precedent:
  • the winning applicant entering into an implementation agreement with the Dutch State in the form as attached to the Tender Regulation, within two weeks from the date of the subsidy award
  • the provision of a bank guarantee in the amount of EUR 10m by a bank established within the EU, in the form as attached to the implementation agreement, within four weeks of the date of the subsidy award.

The main aim of these conditions is to give the Dutch State comfort that the wind park will become operational on time. If the winning applicant fails to satisfy these conditions within the deadlines, the subsidy will be awarded to the next ranked application.
A second bank guarantee7 – in lieu of, and in the same form as, the first bank guarantee, but for an amount of EUR 35m – shall be due within 12 months after the date of the subsidy award.
Pursuant to the implementation agreement, the bank guarantees provide financial security for any and all claims the State may have under that agreement. A one-off penalty of EUR 10m will be immediately due and payable if the subsidy decision is revoked within 12 months at the request of the applicant or if the second bank guarantee is not provided on time. In addition, the subsidy receiver will incur a penalty in the amount of EUR 3.5m in case of a delay in the start of operation of the wind park, increased by EUR 3.5m for each month that the delay continues (the penalty may become due a maximum of ten times). The penalties will be due without any proof of default or summons. The implementation agreement provides for an escape route if the site decision is amended following legal proceedings post subsidy award. In that case the subsidy receiver can withdraw from the implementation agreement without incurring any penalty.
2.7 Essential changes in the project plan post subsidy award
Pursuant to the SDE Decree, the winner of the tender must comply with its plan for the construction and operation of the wind park, as submitted together with its subsidy application. However, the SDE Decree allows for “essential changes” to this plan in relation to the development or operation of the wind park, providing for flexibility with regard to key characteristics of the wind park to enable bidders to use the most up-to-date technology and pursue cost reductions through innovation, as envisaged by the Energy Agreement. Any such deviation from the original plan requires an exemption granted by the Minister of Economic Affairs.
The Policy Rules Amendment of the Production Installation for Offshore Wind Energy provide insight into the decision-making process of the Minister in case of exemption requests in relation to essential changes with respect to characteristics of the production installation.
Pursuant to the policy rules “essential changes” are changes to the production installation that influence:
  • its location
  • its nominal capacity
  • the start of production within four years after the permit has become irrevocable
  • compliance with the site decision
  • compliance with the Offshore Wind Energy Implementing Regulations
  • the technical, financial and economic feasibility of the project plan.

The following changes shall in any event qualify as essential changes:
  • the number of turbines of the production installation
  • the positioning of the turbines
  • the hub height
  • type of turbine
  • type of foundation.

A request for an exemption must be accompanied by an explanation of the effect of the change on the aspects set out above, as well as by an amended wind energy yield calculation, if applicable. The request for an exemption shall be granted if the Minister would have granted the subsidy application, had the change been included in the original subsidy application. This ensures that after the change, the realisation and operation of the production installation remains in compliance with the criteria as set during the application phase. Consequently, the change will not affect the position of the application in the ranking.
According to the explanatory notes to the policy rules, the grant of an exemption does not affect the tender price per kWh and the maximum number of kWh for the subsidy period, as set out in the subsidy decision.
An exemption is subject to objection and appeal proceedings.
2.8 Subsidy transfer
Pursuant to the SDE Decree the subsidy may – unless exempted by the Minister of Economic Affairs – not be transferred to a third party prior to the start of operation of the wind park. However, it is possible to transfer the SDE+ decision after the start of operation of the park, without an exemption.
3. Spatial planning
3.1 Designated areas for offshore wind
One of the key elements of the new legislative framework for offshore wind is the central role played by the Dutch government in the planning and zoning of the wind parks, through the appointment of designated areas for offshore wind and subsequently adopting, within these areas, so-called site decisions for the development of the wind parks.
In the National Water Plan8 – which finds its legal basis in the Water Act and contains the water policy and related spatial planning for the Netherlands – the Dutch Ministers of Economic Affairs and Infrastructure & Environment have allocated four areas for offshore wind parks. The development of offshore wind parks will be restricted to these areas; wind permits will not be awarded for areas outside these designated areas.
These designated areas offer a total capacity of over 17,500 MW (assuming a 6 MW per km2 ratio). However, due to conflicting interests with other offshore activities, the areas that may actually be used for wind parks are likely to be smaller. The five tenders organised by the Dutch State to meet its renewable targets for 2023 are for the areas Borssele and Hollandse Kust.
Except for two strips in the Hollandse Kust area that are located 10-12 nautical miles off the Dutch coast, the four designated areas lie behind the 12-mile zone (the zone 22 km off the Dutch shore).
3.2 Site decisions
Within aforementioned designated areas wind parks may only be developed on locations designated by the Minister of Economic Affairs in a so-called site decision (in Dutch: kavelbesluit). The site decision is a new instrument that finds its legal basis in the Offshore Wind Energy Act that entered into effect on 1 July 2015.
Pursuant to this Act, the Minister of Economic Affairs shall in the site decision take into consideration:
  • the fulfilment of social functions of the sea, including an efficient use of the sea
  • the implications of the site decision for third parties9
  • environmental interests, including ecological interests
  • wind park development costs on the relevant site
  • the interest of having an efficient grid connection.

The site decision shall in any event include terms and conditions in relation to:
  • the rights and interests of third parties in relation to the relevant site
  • the protection of the environment
  • the preservation of Natura 2000 areas and compensation measures pursuant to the Nature Protection Act
  • the provision of exemptions under the Flora and Fauna Act
  • the interest of an efficient use of the site by the wind park
  • the term of the wind permit
  • the costs incurred for the preparation of the site decision, including the conduct of relevant surveys and the required security for decommissioning.

In addition, the site decision shall contain a description of:
  • the measures that aim to reduce or mitigate the effects of the development and operation of the wind park
  • temporary measures to develop the wind park
  • the geographical dimension of the site and the cable route
  • the results of the meteorological and oceanographic survey, the soil survey, the ecological soil survey, the archeological survey and other ecological surveys.

To integrate the aforementioned interests and measures into the site decision, the Dutch State conducts a large number of surveys. The results of these surveys will be published in the site decision. Permit applicants therefore do not have to make an individual assessment of these aspects. The costs in relation to these surveys is for the account of the State and will not be borne by the party that wins the tender.
The terms and conditions of the site decision shall to a large extent be location specific. The site decisions that have already been published include a number of specific pre-conditions for the wind park, such as the minimum rotor surface of individual turbines and the aggregate rotor surface of all wind turbines jointly, the maximum number of turbines that may be installed, the minimum and maximum capacity of the individual wind turbines, the minimum distance between the turbines, the minimum tip height and the maximum height and the permitted turbine foundations (other foundations may be permitted pursuant to an environmental impact assessment). Mitigation measures that have been included in the current site decisions include, for example: measures to reduce bird-wind turbine collisions; noise reduction requirements to avoid disruption of the habitat of porpoises, seals and fish; and the rotation of the turbine blades out of the wind in the event of large bird migration. Other mitigation measures may consist of noise reduction during pile driving to protect porpoises and seals, as well as measures to protect bats. Pursuant to the site decisions that have currently been published the permit holder is obliged to make demonstrable efforts to design and build the wind park in such a way that it actively enhances the sea’s ecosystem and contributes to the local and regional economy and to cooperate in the environmental monitoring and evaluation programme of the Minister of Economic Affairs.
4. Permit
Ultimately, the tender process will determine to whom a wind permit is granted to build an offshore wind park on a site that is designated pursuant to a site decision. The Offshore Wind Energy Act sets out the legal basis and the key requirements for the wind permits. The permit requirements are further elaborated on in the implementation regulation to this Act.
The wind permit will be a relatively concise document, since many issues that would generally be addressed in the permit will be included in the site decision.
A permit will only be awarded if the permit application sufficiently demonstrates that the development and operation of the wind park is achievable – it is technically, financially and economically feasible; can start within four years of the date on which the permit has become irrevocable; and complies with the site decision. These requirements are identical to the eligibility requirements in relation to the SDE+ subsidy.10
For as long as subsidy is required for the development and operation of offshore wind parks,11 the wind permit application process is linked to the SDE+ subsidy application:
  • the wind permit procedure will coincide with the SDE+ subsidy procedure. The Minister will decide on the permit applications simultaneously with the SDE+ applications
  • wind permit applicants will need to comply with the applicable subsidy requirements
  • if more eligible permit applications are submitted, the Minister will issue the wind permit to the party that is awarded the subsidy.

The wind permit award is subject to objection and appeal proceedings. Objections must be filed within six weeks of the date of the award. Subsequently appeal can be filed within six weeks of the date of the decision on the objection.
Pursuant to the Offshore Wind Energy Act, the term for which the wind permit is granted shall not exceed 30 years.
The wind permit may be transferred to a third party with the consent of the Minister of Economic Affairs. Neither the Offshore Wind Energy Act nor its explanatory memorandum address the grounds for obtaining such consent. It is possible for two or more parties to jointly submit a permit application and to jointly become permit holder. A transfer by one of the joint permit holders of its share in the permit also requires the consent of the Minister. However, if one of the joint permit holders ceases to exist, this will not affect the validity of the permit, which will in that case be held by the remaining permit holders.
5. Grid connection
5.1 Offshore grid
The new offshore wind parks shall be connected to an offshore grid to be developed and operated by Dutch transmission system operator TenneT TSO.12 The offshore grid aims to realise a 40% cost reduction for the connection of the offshore wind parks and a 10% overall cost saving for offshore wind energy due to a reduction in investment costs, financing charges and maintenance costs as a result of synergy benefits, as well as cost savings for the wind parks due to the higher availability of the connection to the offshore grid.
For each of the five offshore wind tenders TenneT will construct a platform at sea. Each platform will connect two wind parks13 to the national onshore transmission system through two 220kV-cables, each cable providing a guaranteed capacity of 350 MW. Capacity in excess of 350 MW will not be guaranteed by TenneT. Pursuant to the Tender Regulations 2015 and 2016 it will, however, be allowed to exceed this capacity up to 380 MW14 (overplanting). The wind turbines will be connected to the TenneT platform through 66kV cables, making the Dutch offshore wind farms the first in the world to be connected by a voltage level of 66kV instead of 33kV.
5.2 Development framework and investment plan
In order to plan the investment in the offshore grid, the Dutch government deemed it desirable to provide guidance in the form of a development framework. This framework outlines the design and construction of the offshore grid and describes its main functional and technical requirements. It determines the duties of TenneT as offshore transmission system operator, provides the sequence of the development of the sites and sets the timetable for commissioning of the connection for the sites, as illustrated by the table below.
SitesCommissioning15
Borssele I & II 31 August 2019
Borssele III, IV & V16 Q3 2020
Hollandse Kust (Zuid) I & II Q1 2021
Hollandse Kust (Zuid) III & IV Q1 2022
Hollandse Kust (Noord) Q1 2023

On the basis of the development framework, TenneT draws up a bi-yearly investment plan setting out the envisaged investments, performance targets, deadlines and plans for capacity expansion. The investment plan has to be approved by the Dutch regulator, ACM.
TenneT shall in principle be compensated for the costs of the offshore grid through the regulated transmission tariffs. However, to avoid a substantial increase in the transmission tariffs, TenneT is granted a direct subsidy as compensation for its costs incurred in developing the offshore grid.
5.3 Realisation Agreement and Connection & Transmission Agreement
The operator of the wind park shall enter into a realisation agreement and a connection & transmission agreement with TenneT. The realisation agreement sets out the terms and conditions regarding the development of the connection for the wind park, addressing aspects such as the basic design and technical specifications of the connection and the TenneT platform, as well as operational arrangements and the exchange of information between TenneT and the wind park developer. Pursuant to this agreement, TenneT is obliged to realise the connection on or before the date set in the development framework. After the realisation of the connection, the relationship between the wind park operator and TenneT will be governed by the connection and transmission agreement.
Pursuant to these agreements, the implications of a delay or unavailability of the connection or the offshore transmission system will be solely addressed in the Electricity Act 1998.
5.4 Compensation for delay and unavailability
The Electricity Act 1998 and the Ministerial Order Offshore Electricity Grid Compensation Rules set out the liability regime applicable to TenneT in case of a delay in the completion of the offshore grid or the unavailability of the offshore grid. Pursuant to this liability regime, the wind park may be compensated for postponed revenues and consequential damages (including, inter alia, costs of mitigation measures, hiring additional equipment and staffing – but excluding financing costs, which are deemed to be included in the postponed revenues).
Damages due to delayed completion of the grid

A delay in the construction of the offshore grid is deemed to occur when the completion of the connection of the wind park and the system between the wind park and the onshore transformer station exceeds the completion date set out in the development framework. To qualify for damages, the foundation of the wind park has to be in place and the wind park operator is required to demonstrate that the wind park would have been ready to start operations, had it not taken measures to mitigate damages. A delay in the construction of (part of) the offshore wind park shall therefore affect the compensation payable by TenneT.
Postponed revenues are calculated based on the assumption that missed subsidy revenues due to the delayed completion will be received at the end of the subsidy period (banking to year 16) and missed electricity sales will be realised at the end of the lifetime of the park. On the basis of a discount rate of 7%, the postponed revenues are calculated as follows:
  • [(SDE+ Subsidy Amount – SDE+ Subsidy Amount/2.95) + (SDE+ annual electricity price pursuant to the SDE Decree – SDE+ annual electricity price pursuant to the SDE Decree /3.87)] x electricity that could not be transported.

    Where:
    • The SDE+ Subsidy Amount is the base amount per kWh for which SDE+ subsidy has been granted pursuant to the SDE Decree minus the SDE+ electricity price applicable for that year pursuant to the SDE Decree.
    • The electricity that could not be transported is determined on the basis of the wind speed, and the electricity production profile of the wind park, while taking into account any interruptions in the production of electricity by the wind park due to delays, disruptions or maintenance, as well as any electricity that was transported through the grid. For this purpose a computation model will be set out in a ministerial order.

In this calculation missed electricity over a period of five days per year shall not be taken into account, since this period is deemed necessary for scheduled maintenance of the grid. By disregarding this period, wind park operators are encouraged to schedule their own maintenance as much as possible within the same period. The resulting damages will be increased with legal interest as of the occurrence of the damages.
Damages due to unavailability of the grid

In case of an interruption of transmission of electricity, the postponed revenues are calculated based on the assumption that missed subsidy revenues can be made up by production in later years. On the basis of the assumption that missed electricity production will be made up in a period of five years and a discount rate of 7%, the postponed revenues are calculated as follows:
  • [(SDE+ Subsidy Amount – SDE+ Subsidy Amount/1.4) + SDE+ annual electricity price pursuant to the SDE Decree] x electricity that could not be transported].

Missed electricity over a period of five days per year shall not be taken into account in the determination of postponed electricity sales and postponed subsidy revenues.
6. Decommissioning
Decommissioning shall take place in accordance with a decommissioning plan to be developed by the wind park operator. The Directorate General for Public Works and Water Management (Rijkswaterstaat), the competent authority in relation to the Water Act, is currently preparing guidelines for decommissioning.
Pursuant to the site decisions, decommissioning has to be started within two years after the operation of the wind park is discontinued and must be completed ultimately 30 years after the date on which the wind permit has become irrevocable. The wind park operator shall provide financial security for decommissioning in the amount of EUR 120,000 per MW, as of the start of the construction of the wind park. This amount shall be annually indexed (for the first 12 years resulting in an annual increase by 2%). The amount and index are subject to a periodic review by the Minister of Economic Affairs.
7. Relevant links
8. References
  • Offshore Windpark Egmond aan Zee (OWEZ) (108MW), Prinses Amaliawindpark (120 MW), Gemini windpark (600 MW), Luchterduinen windpark (129 MW)
  • Amounts are excluding costs in relation to the grid connection.
  • Site Borssele V shall be dedicated to innovation. The tender for this site will therefore differ from the other tenders. We expect this tender to open in October 2017.
  • Renewable electricity, green gas, heat and combined heat and power (CHP).
  • See section 4.
  • See section 2.7.
  • Not being a condition precedent for the subsidy decision.
  • The current National Water Plan (also referred to as the second National Water Plan or NWP2) covers the period 2016-2021 and is the successor of the National Water Plan that was published on 22 December 2009 in relation to the period 2009-2015.
  • Third party interests may, inter alia, relate to shipping routes and oil & gas extraction.
  • See section 2.3.
  • If the development and operation of the wind park does not require SDE+ subsidy, a different permitting procedure shall apply pursuant to the Offshore Wind Energy Act. This procedure is not addressed in this brochure.
  • For this purpose TenneT TSO has been appointed offshore transmission system operator.
  • With the exception of TenneT platform Beta that will connect parks on the sites Borssele III, IV and V.
  • With the exception of Borssele site III. For this site the maximum capacity is 360 MW.
  • The date for the connection of the sites Borssele I and II is final. The other deadlines are currently indicative.
  • In relation to the planning for Borssele site V. See note 3.

Denmark
1. Introduction
Since the oil crisis in the early 1970s the Danish energy system has become increasingly more reliant on renewable energy sources. From 2008 to 2014, the total generation from central power stations (coal and gas) and local combined heat and power has declined from 80% to 55%. In the same period, the proportion of wind power in total electricity generation has increased from 20% to around 43%. In the EU in 2014, Denmark had by far the highest share of wind power in its gross final electricity consumption.1

For the electricity sector, the intermediate objective is to supply approx. 50% of the electricity consumption by wind power by the year 2020.2 This target is defined in a broad political agreement of 22 March 2012 on Danish energy policy for the years 2012-2020 (“Energy Agreement 2012”).3

Denmark is a pioneer of the development of offshore wind power, and currently has the world’s longest experience with tenders for offshore wind power. The world's first offshore wind farm was established in 1991 off the coast of Vindeby in Danish waters. Today, 13 offshore wind farms have been established in Denmark, see table below.

Offshore wind farm Established Turbines Capacity
Vindeby 1991 11 4.95 MW
Tunø Knob 1995 10 5 MW
Middelgrunden 2000 20 40 MW
Horns Rev I 2002 80 160 MW
Rønland 2003 8 17.2 MW
Nysted 2003 72 165.6 MW
Samsø 2003 10 23 MW
Frederikshavn 2003 3 7.6 MW
Horns Rev II 2009 91 209 MW
Avedøre Holme 2009/10 3 10.8 MW
Sprogø 2009 7 21 MW
Rødsand II 2010 90 207 MW
Anholt 2013 111 399.6 MW
Source: Danish Energy Agency, www.ens.dk.

Thus, the total Danish capacity of offshore wind farms is 1,271 MW. Ongoing offshore wind farm projects are further expected to add more than 1,000 MW by 2021.

Currently, there are six ongoing offshore wind farm projects: Nissum Bredning experimental wind farm (28 MW); Jammerland Bugt (120–240 MW); Omø Syd (200–320 MW); Horns Rev 3 (400 MW); Kriegers Flak (600 MW); and two near shore wind farms Vesterhav Syd and Vesterhav Nord, respectively (350 MW).

As there is currently no prospect of new near shore tenders coming up, this chapter will not elaborate further on near shore wind farms.
2. Permit
2.1. General
Under the Danish RE Act5 the Danish State may grant rights of use and access to private parties in order to exploit energy from the wind in Danish territorial waters and in the exclusive economic zone (EEZ). The construction and operation of offshore wind farms is mainly regulated within the framework of the RE Act.

There are two different procedures for obtaining permits for construction and operation of offshore wind farms in Denmark: tenders announced by the State, and the so-called open door procedure.

Under the tender procedure, the Danish State invites tenders for an offshore wind farm in a designated location and with a specified capacity, as a concession. Under the open door procedure, a licence application is submitted on the project developer’s own initiative, who also determines the location and capacity of the offshore wind farm.

The permitting process is carried out through a one-stop-shop approach, in which the Danish Energy Agency (DEA) grants the key licences, and coordinates with other relevant public authorities.6

Under both the tender procedure and the open door procedure, the permitting process consists of the following four key licences for construction and operation of offshore wind farms:
  • licence to conduct pre-investigations
  • licence to construct the wind farm
  • licence to exploit the wind power from the wind farm
  • authorisation to produce electricity.

The pre-investigation, construction, and electricity production licences are governed by the RE Act. The electricity production authorisation is governed by the Danish Electricity Supply Act.7 The licences are issued as the project proceeds.
Pre-investigation licence

The pre-investigation licence entitles the licensee to carry out investigations related to the construction of the offshore wind farm within the limits of the licence. The requirements for obtaining a pre-investigation licence differ for the tender procedure and the open door-procedure and are elaborated below in sections 2.3 and 2.4. The licensee has no explicit obligation to carry out the pre-investigations, but the licence will lapse if pre-investigations are not carried out within a certain time limit set out in the licence.

The pre-investigation licence will typically be valid for one year after which an environmental impact assessment (EIA) report is to be submitted to the DEA for approval. Based on the EIA report, the DEA will decide whether a full impact assessment is required. If a project individually, or in combination with other plans or projects, has potential impact on designated international nature reserves (habitat sites, special bird protection sites and Ramsar areas), a full impact assessment is required.8 The impact assessment can be included in the EIA report provided that a clear distinction is made between the report and the impact assessment.9 The DEA will, in its capacity as EIA authority for the offshore installations, submit the EIA report for consultation with other authorities before deciding on approval of the report.

Construction licence

The construction licence grants the licensee the right to construct a wind farm at a certain location, and will include terms concerning the design and appearance of the foundations, towers, and wind turbines, as well as requirements for the overall construction process. This licence is issued to applicants who are entitled to make use of a pre-investigation licence, and are deemed to have the necessary technical and financial capacity to establish the wind farm. The construction licence will expire upon issue of the electricity production licence.

Electricity production licence

The electricity production licence grants the licensee the right to exploit the wind and produce electricity from the wind. The electricity production licence is issued if the applicant documents compliance with the terms and conditions of the construction licence. The licensee must at all times have the required technical and economic capacity to operate the wind farm. The licence is generally granted for 25 years from the date of grid connection (i.e. the time of delivery of the first kWh to the collective electricity supply grid) with the possibility of applying for an extension beyond this 25-year period.

Electricity production authorisation

An electricity production authorisation is required for operating power plants with a capacity exceeding 25 MW. The authorisation is issued if the applicant documents having the necessary technical and financial capacity to operate large power plants. Pursuant to the Electricity Supply Act further conditions may be imposed by the DEA.

Generally, any direct or indirect transfer of the rights and obligations under the above-mentioned licences as well as the electricity production authorisation requires the consent of the DEA, which may be withheld by the DEA for objective reasons.

Objections against the award of the licences or the authorisation may be filed to the Danish Energy Board of Appeal within four weeks from the issuance of the relevant licences/authorisation. Unless decided otherwise by the Energy Board of Appeal, appeals do not have suspensory effect.
2.3. Open door procedure
The open door procedure is an administrative process following which the DEA issues the key licences, provided that the applicant fulfills the legal requirements. There is no element of competition under this procedure.

The DEA enjoys discretionary power in relation to pre-investigation licence applications under the open door procedure, taking into consideration the applicant’s financial and technical capacity and the site’s relevance for exploitation of energy. In its assessment of the relevance of the site, the DEA can include a broad set of criteria, including general planning considerations and rules on the minimum distance from the coast. The pre-investigation licence will not be granted if it is clear that the construction of the prospective wind farm is ruled out due to environmental reasons (e.g. due to the impact on protected areas), safety reasons, maritime traffic, fisheries etc.

The DEA has indicated that it aims to apply stricter conditions for the progress of projects under the open door procedure.10 This entails that the DEA will lay down milestones for each step in the application process, with specific deadlines for the processing of pre-investigation licence applications by the DEA and until the construction licence is applied for. For instance, applicants must submit to the DEA any supplementary information requested by the DEA during the processing of pre-investigation licence applications within four weeks from the request, and applicants must submit an application for a construction licence within six months after the DEA’s approval of the pre-investigation report. These stricter progress conditions will apply to existing as well as new pre-investigation licence applications. The DEA may extend the deadlines if there are special circumstances relating to the application.

Pursuant to the RE Act owners of offshore wind farms located less than 16 kilometers from the coast line are obliged to offer 20% of the ownership shares in the wind farms to local citizens with residence within a distance of 4.5 km from the wind farm’s location, or with residence in a municipality having coastlines within 16 km from the location of the wind farm (referred to as the “option to purchase” scheme). From 1 January 2017, the option to purchase scheme will also apply to owners of holiday homes which generally meet the same conditions as local residents. The purchase options must be offered after issuance of the construction licence, but prior to the grid connection of the wind farm.

In addition, pursuant to the so-called depreciation scheme under the RE Act, owners of wind farms are obliged to compensate depreciation on residential property caused by wind farms, provided that such depreciation exceeds 1% of the property value. In order to inform eligible local citizens about this scheme, the project developer and Danish transmission system operator (TSO) Energinet.dk are required to organise a public meeting. Claims under the scheme will be assessed by Energinet.dk and must be submitted within eight weeks of the public meeting.

As from 1 January 2017 the RE Act entitles local municipalities to object to the issuance of a pre-investigation licence for a wind farm that will be located within 8 km of the coastline. If a municipality objects pursuant to these new rules, the matter will be put before the Energy, Utilities and Climate Committee of the Danish Parliament for review, before the Minister for Energy, Utilities and Climate makes the final decision whether to issue the licence. An objection from a municipality will therefore not automatically result in the application being rejected if the minister, based on certain considerations specified in the RE Act such as security of supply, finds that there is a basis for issuing the pre-investigation licence.
2.4. Tender procedure
Tenders for large-scale offshore wind farms find their basis in the Danish Parliament's political agreements. The tenders are announced in the Supplement to the Official Journal of the European Union.11 Tender invitations are issued by the DEA on behalf of the Danish State. It is also the DEA that lays down the tender specifications after having presented them to the Energy, Utilities and Climate Committee of the Danish Parliament.

In order to be considered for pre-qualification in the tenders, applicants must meet the minimum requirements regarding economic, financial, and technical capacity, as stated in the specific contact notice published in the Supplement to the Official Journal of the European Union. The assessment of the applicant's economic and financial capacity considers, inter alia, the applicant’s overall turnover, total equity or credit rating, its full annual report and audited accounts. In order to fulfil the technical capacity requirement, the applicant must – itself or through, for example, declarations of support – possess experience with project development and management of the construction of offshore wind farms.

Before bid submission, pre-investigations are carried out by Energinet.dk, by an order issued by the Minister for Energy, Utilities and Climate. Thus, a fully consented EIA is in place before the final bids are submitted. This aims is to allow tenderers to submit qualified and competitive offers. The costs incurred by Energinet.dk for pre-investigations and preparation of the EIA are borne by the winner of the tender.

The winner of the tender is awarded a concession to construct and operate the tendered offshore wind farm. The concession is awarded on the basis of the award criterion “the lowest price”, and reflects the minimum need for subsidies (see section 3 below). Unlike the open door procedure, where no concession agreement is concluded, the tender procedure is concluded by the DEA and the winning tenderer entering into a concession agreement. In previous completed tenders, the concession agreements contained detailed terms and conditions in relation to, inter alia, the key licences, the subsidy regime, grid connection, defective performance, decommissioning, transfer of the concession, liability, and compensation for delayed grid connection.

Under the RE Act, the concessionaire may be subject to a penalty for defective performance if the concessionaire, for whatever reason, fails to construct and connect the offshore wind farm in accordance with the terms of the concession agreement.

In the concession agreement and/or the key licences, the DEA usually requires that the concessionaire provides certain guarantees, including a guarantee for payment of a penalty for defective performance and a guarantee for dismantling and decommissioning the wind farm pursuant to the terms and conditions of the construction licence and the electricity production authorisation.

Due to the nature of the tender procedure, the concession award may be subject to objections with the Danish Complaints Board for Public Procurement. Objections must be lodged within a period of 45 calendar days, starting from the day after the publication of the award notice in the Supplement to the Official Journal of the European Union.

After entering into the concession agreement, the concessionaire is granted a pre-investigation licence and a construction licence. The concessionaire will have to apply for an electricity production licence and an electricity production authorisation upon commencement of construction, and do so no later than two months before the first wind turbine supplies the first kWh to the collective electricity supply grid.
2.5. Certification of wind turbines
Offshore wind farms are subject to technical certification of the wind turbines pursuant to the Danish Executive Order no. 73 of 25 January 2013 on a technical certification scheme for wind turbines. Pursuant to this certification scheme, the turbine producer is responsible for obtaining a type or prototype turbine certification from a certifying company accredited under the Executive Order. The period of validity of such certification varies according to the type of certification.

In addition, turbines with a swept area exceeding 200 m2 must, upon installation, be certified as a project in accordance with European standard DS/EN 61400-22, including specified DS/EN, IEC and ISO standards. Project certification must be applied for by the project owner and is issued by a DEA-approved certifying company in relation to a specified location and design. Project certification is valid for the entire design lifetime of the turbines.13
3. Subsidy
3.1. General
Historically, subsidies granted by the Danish State have been essential to the development of wind power in Denmark. Danish support to renewable energy (RE support) is currently financed through the so-called PSO (Public Service Obligation) tariff. This includes financing of subsidies for electricity produced at offshore wind farms, whether tendered or under the open door procedure.

However, in 2014, the European Commission criticised the PSO tariff for imposing a burden on imported electricity and took the position that the PSO tariff is in violation of the Treaty of the Functioning of the European Union. Consequently, Denmark committed to finding alternative financing of the Danish RE support by 1 January 2017. In November 2016, the government and a majority of the parties of the Danish Parliament reached an agreement hereon. Pursuant to the political agreement, the PSO tariff will be gradually phased out during the years 2017 – 2022. The RE Support will instead be financed directly through the national budget.

The amount of subsidies granted for electricity produced at offshore wind farms depends on whether the offshore wind farm is established following the open door procedure or a tender procedure14.
3.2. Subsidies for open-door offshore wind farms
Offshore wind farms established pursuant to the open door procedure are entitled to subsidies under the subsidy scheme that applies to onshore wind farms.

The subsidy amount will depend on the date of grid connection. Wind farms that are connected to the grid after 1 January 2014 and produce electricity that is supplied to the Danish collective supply grid receive a premium of maximum DKK 0.25 per kWh in addition to the market price for electricity. Pursuant to this subsidy scheme, the premium together with the market price for electricity (the total settling price) may not exceed DKK 0.58 per kWh. Consequently, if the market price exceeds DKK 0.33 per kWh, the premium is reduced accordingly.

The premium is granted for a total amount of production (e.g. in MWh) determined for each project based on a combination of the wind farm’s installed effect and its swept area.15

It should be noted that the European Commission’s state aid approval of this subsidy scheme expires on 21 February 2018.16 In order to be entitled to the premium under this subsidy scheme, wind turbines must therefore be connected to the grid prior to this date. At this time, no new subsidy scheme for offshore wind farm projects under the open door procedure has been announced for the period after 21 February 2018.

In addition to the premium, compensation for balancing costs is granted. This compensation is DKK 0.18 per kWh and is granted for 20 years from the time of grid connection.
3.3 Subsidies for tendered offshore wind farms
Tendered offshore wind farms are entitled to subsidies pursuant to a so-called “Contract for Difference” (CfD). The CfD is specific for each tendered offshore wind farm and is based on the lowest tendered price.

The CfD for tendered offshore wind farms are set out in the table below.

Offshore wind farm Tender date CfD
Horns Rev 2 7 July 2004 DKK 0.518/kWh (approx. EUR 0.07)
Rødsand 2 7 February 2008 DKK 0.629/kWh (approx. EUR 0.08)
Anholt 30 April 2009 DKK 1.051/kWh (approx. EUR 0.14)
Horns Rev 3 6 December 2013 DKK 0.77/kWh (approx. EUR 0.10)

The CfD is calculated per hour as the difference between the tendered price per kWh and the spot price of electricity in the relevant area, i.e. western Denmark (DK1) or eastern Denmark (DK2), as stated by the Nordic electricity exchange, Nord Pool. The total CfD in a given hour is the product of the CfD and the output measured in that hour. The CfD is not granted for electricity produced in hours when the spot price is not positive.

Upon conclusion of the concession agreement, the CfD is embedded in Danish law in a specific provision in the RE Act17, by ordinary legislative procedure of the Danish parliament.

The CfD is subject to the electricity from the offshore wind farm being supplied to the Danish collective supply grid. The CfD period will commence when the wind farm is in operation and connected to the grid, i.e. when the first kWh is supplied to the grid. It is granted for a limited amount of electricity produced, corresponding to a certain quantity of full-load hours. In addition, the CfD is limited to a specific period, e.g. in the current Kriegers Flak tender, the CfD is granted for a maximum of 30 TWh corresponding to 50,000 full-load hours at 600 MW, and for no longer than 20 years from the time of grid connection.

Energinet.dk decides on the amount of the CfD that is paid out to the concessionaire based on metered data of electricity supplied to the grid. However, it is possible to assign the CfD payments to a third party by notification to Energinet.dk of such assignment.

Balancing costs are not reimbursed or otherwise compensated.
4. Spatial planning
4.1. General
Spatial planning for offshore installations, including wind farms, is subject to the Act on Maritime Spatial Planning18 which sets out a general framework for the planning of offshore installations and maritime activities.

The Act implements Directive 2014/89/EU on establishing a framework for maritime spatial planning. Under the Act, the Danish Minister of Business and Growth must prepare and implement a maritime spatial plan, organising the maritime activities in Danish waters. The overall purpose of the plan is to promote sustainable use of the maritime space and to contribute, through an ecosystem-based approach, to the sustainable development of energy sectors at sea, in maritime transport and in the fisheries and aquaculture sectors. Danish public authorities must take the maritime spatial plan into account when issuing permits etc. for offshore activities.

The first Danish maritime spatial plan must be adopted by 31 March 2021. We are not aware of the government planning to issue a maritime spatial plan before this date. The contents of the first plan are therefore currently unknown. Therefore, spatial planning of offshore wind farms is, for the time being, solely carried out by the DEA under the RE Act, in connection with the assessment of project applications and the planning of tender procedures.
4.2. Planning of open door wind farms
Under the open door procedure no specific sites are designated for offshore wind farms. Upon receipt of an application for a pre-investigation licence, the DEA will assess whether the area for which the licence is applied for is relevant for exploitation of energy. As indicated in section 2.3 above, the DEA’s assessment will, inter alia, include general planning considerations and rules on minimum distance from the coast.

If an application for a pre-investigation licence under the open door procedure concerns an area which is designated for the establishment of tendered offshore wind farms (see section 4.3 below), the pre-investigation licence shall be denied.
4.3. Planning of tendered offshore wind farms
Spatial planning of tendered offshore wind farms is regulated by political agreements in the Danish Parliament, designating specific sites for construction of (tendered) large-scale offshore wind farms.

In 2008, a political agreement was reached between a large majority of parties in the Danish Parliament in relation to the first site specific offshore wind tender. The tender resulted in the establishment of Anholt offshore wind farm, a 400 MW offshore wind farm in the Kattegat, the waters between Djursland and the island of Anholt.

In its report on future offshore wind power sites19, the Offshore Wind Committee – consisting of the DEA, the Danish Nature Agency, the Danish Maritime Authority, Energinet.dk, and research centre DTU-Risø – has, on the basis of a strategic environmental assessment, identified areas suitable for the establishment of offshore wind farms. According to the committee, the establishment of offshore wind farms in these areas will not have a materially adverse impact on other maritime activities.

Following the above report, invitations to site-specific tenders were agreed on in the Energy Agreement 2012 and in a political agreement on growth that was concluded in June 2014, leading to the installation of offshore wind turbines at Horns Rev 3 (400 MW), Kriegers Flak (600 MW), and at near shore areas Vester Hav Syd and Vesterhav Nord (jointly 350 MW).20
5. Grid connection
5.1. General requirements
The Danish collective electricity supply grid comprises the transmission grid and the distribution grid. The electricity transmission grid is owned and operated by the Danish TSO, Energinet.dk, a non-profit company owned by the Ministry of Energy, Utilities and Climate on behalf of the Danish State. The electricity distribution grid is owned and operated by a number of grid companies.

Requirements for grid connection mainly follow from the RE Act, the Executive Order on Grid Connection of Wind Turbines21 and Energinet.dk’s technical regulations. Terms and conditions for grid connection are usually also stipulated by the DEA in the construction licence and the electricity production licence.

In order to be connected to the grid in Denmark the wind farm owner submits a verification report to the operator of the grid to which the wind farm will be connected In the verification report the wind farm owner will demonstrate that the wind farm complies with all applicable technical, functional and documentation requirements. Provided that such requirements are met, the grid operator is obliged to connect the wind farm to the collective grid.23 As large-scale offshore wind farms are usually connected directly to the transmission grid, the grid connection will be made by Energinet.dk for such wind farms.

Decisions on grid connection made by either Energinet.dk as the TSO or an operator of the distribution grid may be appealed to the Danish Energy Regulatory Authority (DERA) within four weeks after the decision has been announced.24
5.2. Allocation of costs
In general, the offshore wind farm developer must develop and operate, at its own cost, the internal grid of the wind farm, up until the grid connection point. The grid operator is, on the other hand, responsible for developing and operating the facilities on the other side of the grid connection point. Parties will have to agree in a separate agreement on ownership limits, interfaces, and the allocation of costs, risks, maintenance etc. for the grid connection point itself.

As the grid connection point for offshore wind farms established under the open door procedure is located onshore, the owner of the wind farm pays for the necessary facilities to transport electricity all the way to shore.

However, where an offshore wind farm is established following a tender procedure, the grid connection point is placed offshore, and therefore the wind farm owner shall only be responsible for the internal grid of the wind farm up until the grid connection point, while Energinet.dk is responsible for establishing the facilities that transport the electricity to shore, such as transformer platforms and cables. The tender specifications will usually include detailed information on voltage levels, ownership limits, interfaces and the obligations of the wind farm owner in relation to the facilities for transmission of power to shore.
5.3. Liability/compensation for defective performance in the development phase.
If the owner of a tendered offshore wind farm fails to construct and connect the wind farm to the grid in accordance with the tender specifications, the wind farm owner can be held strictly liable for Energinet.dk’s losses suffered as a consequence thereof. Conversely, Energinet.dk is strictly liable for losses incurred by the wind farm, if it fails to meet the deadline for grid connection and other agreed conditions laid down in the tender specifications. The terms and conditions applicable to such strict liability, including any caps or guarantees, follow from the specific tender specifications.
5.4. Compensation for curtailment of electricity production
As TSO, Energinet.dk is entitled to order electricity producers to reduce or shut down their production if necessary. The rules for such downward regulation are different for offshore wind farms established under a tender procedure and under the open door procedure and vary according to the type of production.

Owners of offshore wind farms established following a tender procedure may be ordered to reduce or shut down production under the RE Act if necessary due to (i) defects in, or maintenance work in relation to, the grid connection facilities or the transmission grid or (ii) limitations in available transmission grid capacity.

In case of an order of downward regulation under the RE Act, Energinet.dk will compensate the owner of the offshore wind farm for losses incurred because of the reduction, corresponding to the situation where downward regulation was not ordered by Energinet.dk. This right to compensation applies for a period of 25 years, starting from the day on which the wind farm has received an electricity production licence and at least one wind turbine has been put into operation.

Owners of offshore wind farms established under the open door procedure are not subject to the same rules on downward regulation and compensation. The electricity production from these offshore wind farms may be reduced under the Danish Electricity Supply Act if necessary due to security of supply. However, under the Act, electricity produced using renewable sources has preferential access to the grid. Thus, Energinet.dk shall reduce electricity production using conventional energy sources before reducing electricity production from renewable sources. Electricity production reductions under the Electricity Supply Act may also trigger compensation to the producers, but generally in a more limited form than pursuant to the RE Act.
6. Decommissioning
6.1. General framework
Danish law does not include specific requirements regarding decommissioning of offshore wind farms. Decommissioning liabilities are regulated in the construction licence and in the electricity production authorisation issued by the DEA, as well as in the concession agreement (if the wind farm is established following a tender procedure).

During the recent near shore tender process the DEA indicated that it is not possible to exhaustively determine detailed decommissioning requirements, as the environmental requirements will have to be assessed at the time of decommissioning. Furthermore, there is no practical experience and only little knowledge on decommissioning, as no large offshore wind farms have been decommissioned in Denmark so far.

However, in early 2016 DONG Energy announced that it is planning to decommission Denmark’s first offshore wind farm in Vindeby. In its announcement, DONG Energy invites discussion on the future use of the infrastructure around the park (including transformer stations and cables), in order to assess if it could be of interest to other companies with activities in renewable energy. It is DONG Energy’s intention that Vindeby might set the first example for both efficient and environmentally friendly decommissioning of offshore wind parks, providing the companies involved with a head start in the area.
6.2. General decommissioning requirements
The construction licence and the electricity production authorisation usually include conditions under which the owner of the wind farm (the licensee) is obliged, at its own account, to restore the area to its former condition, including remediation and clean-up of the area. Further requirements may apply pursuant to a decommissioning plan prepared by the owner of the wind farm which is subject to the approval of the DEA. In addition, the DEA may require the wind farm to be removed in full or in part in accordance with a timetable stipulated by the DEA. It may further be required that the owner of the wind farm provides an adequate financial guarantee for the decommissioning of the wind farm.
7. Links
8. References
  • See Danish Ministry for Energy, Utilities and Climate’s press release of 13 May 2016 which refer to Eurostat statistics (in Danish): http://www.efkm.dk/nyheder/regeringen-skabe-vaekst-ved-saenke-elregningen.
  • See Baseline Projection 2015, published by the DEA (in Danish): https://ens.dk/sites/ens.dk/files/Basisfremskrivning/dk_energi_klimafremskrivning_2015.pdf.
  • The Energy Agreement 2012 was supported by 95% of the members of the Danish Parliament in 2012.
  • See White paper “Wind energy moving ahead - How Denmark utilises wind in the energy sector”, October 2015, available on www.stateofgreen.com.
  • Consolidated Act no. 122 of 6 February 2015 on the Promotion of Renewable Energy, as subsequently amended.
  • It follows from a recent amendment to the RE Act that the Minister for Energy, Utilities and Climate intends to revoke the delegation to the DEA to grant pre-investigation licences, see also section 2.3. The authority to issue such licence will be with the minister. At the time of writing, the delegation has not been revoked. It is therefore not yet specified whether the amendment will affect the tender procedure for offshore wind farms.
  • Consolidated Act no. 418 of 25 April 2016 on Electricity Supply, as subsequently amended.
  • See s 27 of the RE Act and s 2, cf. s 1(2) of Executive Order no. 1476 of 13 December 2010 on environmental impact assessments regarding international nature conservation sites and protection of certain species in connection with projects on the establishment etc. of offshore electricity production plants and electricity supply grids.
  • See s 3(2) of Executive Order no. 1476 of 13 December 2010.
  • See https://ens.dk/ansvarsomraader/vindenergi/aaben-doer-ordningen-havvindmoeller/information-projektudviklere-om-aaben (in Danish).
  • http://ted.europa.eu/TED/main/HomePage.do
  • A list of certifying companies accredited to issue project certifications can be found at the website of the DEA’s secretariat for the Danish Wind Turbine Certification Scheme: http://www.vindmoellegodkendelse.dk/certificering/certificerende-virksomheder/.
  • See http://www.vindmoellegodkendelse.dk/om-ordningen/teknisk-grundlag/ (in Danish).
  • Electricity produced from offshore wind turbines that incorporate one or more significant experimental aspects may receive subsidies under a subsidy scheme solely applicable for such projects. Subsidies will be granted in the form of a CfD of 70 øre/kWh for a combination of the electricity production for 15,000 hours at the wind turbine’s installed capacity (full-load hours) and an electricity production of 12.7 MWh per rotor area (m2). The entire subsidy scheme is limited to a pool of 50 MW. The CfD may only be granted in the period running to the end of 2016 and within the pool of 50 MW.
  • The installed effect accounts for 30 % and the swept area for 70 % of the calculated total amount. Specifically, pursuant to section 35 a, subsection 2, of the RE Act, the formula for determining the total amount for supported production in MWh for a wind farm is 6,600 hours x installed effect in MWh + 5.6 MWh x Swept area in m2.
  • Unrelated to the PSO negotiations, as referenced above.
  • Specifically as a subsection of section 37 of the RE Act.
  • Act no. 615 of 8 June 2016.
  • Report on large-scale offshore wind farms in Denmark – Update on the future offshore wind farm sites, April 2011.
  • In the Energy Agreement 2012, site-specific tenders in relation to an aggregate capacity of 1,450 MW were agreed on. However, during political negotiations concerning the 2014 “growth package”, it was decided to reduce one of the envisaged tenders, the near shore tender, with 100 MW, to 350 MW.
  • Energinet.dk also owns the interconnectors that combine Denmark to its neighbouring countries.
  • Executive Order no. 1115 of 18 September 2015 on grid connection of wind turbines and subsidies for electricity produced by wind turbines etc., as subsequently amended.
  • The transmission grid and the distribution grid.
  • The appeal must be submitted to Energinet.dk which, within four weeks from receipt, will forward the appeal to the DERA with a statement and the information forming the basis for the decision.
  • See http://www.dongenergy.com/en/media/newsroom/news/articles/worlds-first-offshore-wind-farm-on-its-last-turn.

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