Netherlands: Legal developments in offshore wind energy - part 5

Just before its summer recess, Parliament made important progress preparing for the upcoming offshore wind energy tenders organized by the Dutch State, including recent key amendments to:

• the final version of the Implementation Regulation of the Offshore Wind Energy Act, published on 3 July 2015 addressing, inter alia, the wind permit procedure; and
• the final version of the Tender Regulation 2015, published on 3 July 2015 regarding the SDE+ subsidy tender.

Offshore Wind Energy Act and its Implementation Regulation

The Offshore Wind Energy Act, which entered into force on 1 July 2015, constitutes an important milestone in the development of a new regulatory framework for offshore wind energy. The Act contains the key requirements for site decisions and issuance of wind permits.

The permit requirements are further elaborated in the Implementation Regulation of the Offshore Wind Energy Act which will enter into effect simultaneously with the Tender Regulation 2015, which is scheduled for 1 December 2015 (however if the site decisions enter into effect later than 1 December 2015, the Tender Regulation 2015 will enter into effect on the date on which both site decisions have entered into effect).

The final version of the Implementation Regulation of the Offshore Wind Energy Act contains only minor changes compared to the version that was published for consultation. Most notably, the final version:

• Addresses the assessment of the technical feasibility of an offshore wind energy park (one of the permit requirements under the Offshore Wind Energy Act). This requirement had not previously been specified, since it was felt that the bank guarantees required under the implementation agreement would provide sufficient comfort that the winning project is technically feasible.
• Requires that the technical feasibility assessment include fulfillment of the Water Decree, meaning that, unless the wind turbines are certified, the applicant will have to submit a report by an independent expert, ultimately 4 weeks prior to the start of operations, proving that the engineering structure of the wind park is solid.

Tender Regulation 2015

Notable changes introduced by the final version of the Tender Regulation 2015 include:

Subsidy ceiling, basic electricity price and maximum tender amount established

Subsidies will be offered for wind parks with a minimum capacity of 351 MW (reduced by the capacity of the turbine with the lowest capacity) and a maximum capacity of 380 MW per site. The subsidy ceiling shall be € 2.5 million per site with the basic electricity price (floor price) of € 0.029 per kWh. The maximum tender amount for the first tender shall be € 0.124 per kWh.

Bank guarantees and penalties increased

The amounts of the two bank guarantees required pursuant to the implementation agreement between the subsidy receiver and the Minister of Economic Affairs, have been increased: the first bank guarantee (to be provided within 4 weeks from the subsidy award) must be EUR 10,000,000; and the second bank guarantee (to be provided within 12 months after the subsidy award) must be EUR 35,000,000.

If the subsidy receiver fails to timely provide the second bank guarantee, a penalty of EUR 10,000,000 will be incurred. In addition, the subsidy receiver will incur a penalty in the amount of EUR 3,500,000 for a delay in commencing operation of the wind park, plus EUR 3,500,000 for each month that the delay continues. These penalties will be due without any proof of default or summons.

Implications of failure to meet conditions precedent

If an applicant fails to satisfy the 2 conditions precedent required for the subsidy, the subsidy will be awarded to next ranked application. The two conditions precedent for the subsidy award are: (i) the applicant must enter into an implementation agreement with the Ministry of Economic Affairs within 2 weeks of the date of the award and (ii) the applicant must provide the required bank guarantee for an amount of EUR 10,000,000 within 4 weeks from the date of the subsidy award.

Equity capital requirement increased and clarified

The equity capital requirement, which must be satisfied by all applicants and serves to demonstrate the financial feasibility of the wind park, increased from 5% to 10% of the total investment of the wind park.

Applicants may include the equity capital of their parent company or, if the applicant is a consortium of parties, of all consortium partners in fulfilling the equity capital requirement. Fulfillment of this equity capital requirement can be demonstrated by the most recent annual accounts of the applicant, its consortium partners or parent company but may not date back more than 3 calendar years from the year the subsidy application was submitted.

Preliminary proof of financing required

Subsidy applicants must provide letters of intent from their lenders, if their equity capital constitutes less than 20% of the total investment. The letters of intent must address the difference between the 20% and the actual equity.

The regulation that was published for consultation did not require a financing plan as part of the subsidy application because it would be unlikely that applicants could provide letters of intent from lenders for the entire amount of financing at the time of the subsidy application. Moreover, it was felt that the bank guarantees provided by the winning applicant would provide sufficient comfort that the project would be financially feasible.

Ranking of (bundled) applications

Although the subsidy will still be awarded to the applicant with the lowest tender amount, a minor change has been made regarding the ranking of bids; if the equity capital submitted in a bundled application does not equal at least 10% of the total investment costs for sites I and II jointly, the applicant shall only be eligible for subsidy for the site with the lowest tender amount. If the tender amount is identical for both sites, the Minister of Economic Affairs will determine randomly which site is eligible for subsidy.

Compatible state aid

On 7 April 2015, the European Commission approved the recent modification of the SDE Decree concluding that the SDE+ scheme allocates subsidy through a competitive bidding process. As a consequence, 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 above information focuses only on recent changes. The wind energy regulatory framework includes many more regulations and acts – as indicated by the following chart providing an overview of the status of the wind energy regulatory framework. For a more comprehensive overview of the contents of these regulations please see part 3 and part 4 of this series.