Offshore Wind in Norway – First Round Announced

Europe

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

AREA

TECHNOLOGY

NO OF AWARDS

MW PER AWARD

COMPETITION MODEL

Sørlige Nordsjø II

Bottom-fixed or floating

1

Min. 1,400 Max. 1,500

Auction following  prequalification of 6-8 participants

Utsira Nord

Floating

3

(State aid: 2)

500, potential increase to 750

Qualitative criteria. Separate competition for state aid following maturation and impact assessment.

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

SØRLIGE NORDSJØ II

UTSIRA NORD

Prequalification criteria

Selection criteria

Execution Capabilities – 60 %

  • Financial strength
  • Project financing plan
  • Integrity of project manager
  • Competence of key personnel
  • Relevant experience
  • Health, safety & environment
  • Project concept
  • Project plan

Cost level 2030 – 30 %  

Sustainability – 20 %

  • Climate footprint
  • Co-existence
  • Waste, recycling and reuse
  • Nature and environment

Innovation & technology development – 20 %

  • Potential for cost reduction
  • Potential for spread/upscaling of technology

Positive local ripple effects – 20 %

  • Competence development
  • Plan for competence building with SMEs
  • Plan for development of the supply chain industry

Execution Capabilities – 30 %

  • Financial strength
  • Project financing plan
  • Integrity of project manager
  • Competence of key personnel
  • Relevant experience
  • Health, safety & environment Project concept
  • Project plan

Auction Model

 

British auction with open bidding (NOK-øre/kWh)

 

Reservation price of 66 øre/kWh

Sustainability – 10 %

  • Climate footprint
  • Co-existence
  • Waste, recycling and reuse
  • Nature and environment

Positive local ripple effects – 10 %

  • Competence development
  • Plan for competence building with small and medium sized companies
  • Plan for development of the supply chain industry

Timeline

SØRLIGE NORDSJØ II

UTSIRA NORD

17 April – 1 June 2023 | Questions

17 April – 1 June 2023 | Questions

4 August 2023 12:00 hours | Application for prequalification

1 September 2023 | License application

August 2023 | Detailed rules for the auction expected to be announced

December 2023 | Expected project area award

October 2023 | Prequalification decision expected to be announced

State aid competition

December 2023 | Expected timing of auction

 

Further information in English can be found here. The competition documents (Norwegian only) can be accessed here.