The subsidy tender for the construction and operation of offshore wind farms is increasingly taking shape. With the Offshore Wind Energy Act already having entered into force on 1 July 2015, the Regulation on Offshore Wind Energy 2015 and the Implementation Regulation on Offshore Wind Energy have now also been published in the Government Gazette on 3 July 2015. Both Regulations will enter into force on 1 December 2015.
Drafts of these Regulations were available for inspection in April 2015. No major changes have since been made. Below we briefly outline the essence of the Regulations and the changes made compared to the draft.
Regulation on Offshore Wind Energy 2015
This Regulation specifies to whom the subsidy will be granted for the development of the first two sites of the Borssele wind farm zone (sites I and II).
The main changes compared to the draft are as follows:
- Applicant’s equity capital must be 10%
In the draft, the equity capital requirement was only 5%. The Regulation now states that the applicant’s equity capital must represent at least 10% of the total investment costs of the production installation(s).
- Determination of capital requirement in joint ventures
The Regulation now clarifies that if the subsidy applicant is a joint venture, the amount of equity capital means the aggregate amount of the equity capital of each of the partners in the joint venture. If the subsidy applicant is a subsidiary, the amount of equity capital means the aggregate amount of equity capital of the parent company and the subsidiary.
- Bank guarantee amounts increased
A first bank guarantee of €10 million must be issued within four weeks. This is twice the amount that was mentioned in the draft. A second bank guarantee is to be provided within 12 months. Previously the amount of this bank guarantee was €25 million but this amount is now €35 million.
- Amount of the penalties increased
If the operation of the production installation has not started in time, a €3.5 million penalty is forfeited, followed by a monthly penalty in the same amount up to a maximum of €35 million. If the second bank guarantee is not provided in time or the subsidy decision is withdrawn within 12 months at the applicant’s request, the penalty now amounts to €10 million (previous amount was €5 million).
- Tender amount and electricity base price determined
The tender amount is no more than €0.124 per kWh. The electricity base price is €0.029 per kWh. The subsidy ceiling is €2.5 billion per site.
- What happens if any of the conditions precedent are not satisfied?
If any of the conditions precedent (signing of the realisation agreement or issue of a bank guarantee) are not satisfied or are not satisfied in time, the subsidy will be set at nil and a subsidy will be granted to the applicant that came second in the subsidy tender. This ensures that the wind farm will be realised without much delay and without the need to organise a new tender.
- Ranking of the applications
The ranking of applications has remained virtually unchanged and is based on the tender amount. Combined applications are subject to specific rules. A subsidy can only be received for both sites if the 10% capital requirement has been met. If this is not met, the applicant will only be eligible for a subsidy for one of the two sites. In that case, it is no longer up to the applicant to choose for which site a subsidy is granted, as this will be determined on the basis of the tender amount per kWh. The application with the lowest tender amount is eligible for a subsidy. If the tender amount of both applications is the same, lots will be drawn to decide which of the two applications is eligible for a subsidy.
- No state aid
The explanatory note to the Regulation now states that the European Commission has approved the SDE Decree. The European Commission concluded that the Decree involves a competitive subsidy system, as a result of which individual subsidy decisions for wind farms exceeding 250 MW need not be notified to the European Commission.
- Amendment of the General Implementation Regulation concerning the Stimulation of Sustainable Energy Production
The Regulation also amends this General Implementation Regulation. One of the provisions is that the subsidy applicant must sufficiently demonstrate that the wind turbines are strong enough to withstand the powers to be expected from the wind, waves, sea current and use of the turbine.
Another provision is that if the applicant’s equity capital is less than 20% of the total capital required, only a letter of intent from a financier is needed for the remaining portion of this 20%. A similar provision about the determination of the amount of equity capital for joint ventures has been included here too.
If the subsidy applicant is a joint venture, the application must include a list of the joint venture partners. All partners must sign this list to allow each of the partners’ equity capital to be considered in the determination of the equity capital.
Finally, the Regulation provides that insight into the equity capital must be offered by supplying the most recent annual report. The most recently adopted financial statements of the applicant, its parent company and/or the partners in the joint venture have to be provided for this purpose. The financial statements may not be older than three years. This means that, upon the application deadline in 2016, the financial statements of the year 2013, 2014 or 2015 may be provided.
The explanatory note states that a form will be made available via www.rvo.nl. It will include a request to the subsidy applicant to substantiate the costs of investment and operation.
Implementation Regulation on Offshore Wind Energy
The Implementation Regulation further details some criteria set out in the Offshore Wind Energy Act for the granting of the wind permit. These criteria relate to the financial and technical feasibility of the wind farm.
The main changes compared to the draft are as follows:
- The assessment of the technical feasibility will take into account information from the applicant that must sufficiently demonstrate that the aforementioned requirements on the strength of the wind turbines will be satisfied in time.
- The assessment of the financial feasibility will take into account the level of insight into the equity capital provided by the applicant.
The publication of the Regulation and the Implementation Regulation marks yet another necessary step in the tender process. The rules of play for the subsidy tender are now final. Subsidy applications may be filed between 2 December 2015 (unless the wind farm site decision has not entered into force at that time) and 31 March 2016, 5 p.m.