Dutch Offshore Wind – Certainty for Bidders in the Tenders

21 December 2015

Michelle de Rijke, Mariska van de Sanden


Dutch Minister Kamp of Economic Affairs (the Minister) runs a tight ship with the proposal for the Electricity and Gas Act (Proposal): the Proposal was submitted on 4 May 2015, adopted by the House of Representatives on 13 October 2015 and was scheduled for plenary discussion in the Senate on 22 December 2015. [1] This is an unusually short term. In his Explanatory Memorandum to the Senate, the Minister advanced a range of arguments to bring the Senate to the adoption of the Proposal. [2] In accordance with his argumentation, the Minister intends to provide the certainty required for active development of offshore wind energy production:

  • The first two site decisions, which determine the conditions for the construction and exploitation of future wind power plants can only be enacted after the decision for the offshore transmission system has entered into effect; for, the site decisions depart from the connection of wind power plants with an offshore transmission system;
  • Parties that want to bid for the sites must be certain that the offshore transmission system will actually be realised; this is why the starting date of the first tender has moved;
  • If the legislative proposal is not adopted now, it is unwise to determine the site decisions in anticipation of a possible entry into effect as of 1 March 2016 and to start the application period for the subsidy and permit of the first parcels; in the unlikely event that the legislative proposal is not adopted, the site decisions would have to be reviewed and the current application procedure should be cancelled.
  • Against the background of the drafted uncertainty it is not to be expected that the parties will be interested in bidding before the legislative proposal has been adopted: this is also what the parties indicate.

This definite argumentation may create the impression that once the legislative proposal has been adopted, (legal) uncertainties for the parties that want to contend for the subsidy and permit for the construction and exploitation of the first wind power plants will end. This is not the case though. After adoption, the site decisions will not be laid down irrevocably and it applies to the winner of the tender – the beneficiary who is also the concessionaire – that the subsidy and the permit intrinsically related to this are not set in stone.

Site decisions are not irrevocable after adoption

The Dutch Offshore Wind Energy Act [3] provides that offshore wind power plants may only be built on locations (sites) laid down in a site decision. As stated above, the site decisions provide where and on which conditions a wind power plant may be built and exploited. The wind energy site Borssele has been designated in the Dutch National Water Plan (2009-2015).[4] The drafts of the site decisions for the sites Borssele I and II were made available for consultation on the basis of section 3.4 of the Dutch General Administrative Law Act and 20 parties have provided their written view.[5] The original planning was that by the end of November the final site decisions would be published. This was postponed until after the discussion of the legislative proposal in the Senate on 22 December 2015.

When the final site decisions will have entered into effect, interested parties that submitted a written view will have a six weeks' period to appeal against one or both decisions to the Dutch Trade and Industry Appeals Tribunal. If an appeal is lodged, the provisions from Chapter 2 section B of the Dutch Crisis and Recovery Act apply.[6] This implies that the grounds of appeal must be submitted simultaneously with the lodging of the appeal. Subsequently, the administrative court will render judgment within 6 months, unless the administrative loop is applied, in which case judgment will be rendered within one year. The Minister expressed the expectation that mid-2016 the site decisions would be irrevocable. With this, the Minister apparently assumed that a final judgment would be rendered within 6 months and the entire site decision would be maintained. As the publication of the final site decisions has been adjourned, this term shifts and it is not certain at all that the site decisions will remain in force in full. For that matter: for reaching the 20-20 goals this is to be hoped.

A site decision that becomes irrevocable at a later moment will have consequences for the moment at which the winner of the tender will start to use the wind power plant. Pursuant to section 10 of the Offshore Wind Energy Regulation 2015[7], this must take place five years after the date of the subsidy decision. But if the site decision in question becomes irrevocable after the subsidy decision, the five years' term starts after the date on which the site decision has become irrevocable.

For that matter, if a site decision is changed as a result of appeal proceedings the subsidy recipient may request the Minister within six months after this change to withdraw the subsidy decision without him having to pay a fine. By then, quite some time will have passed since the end of the tender procedure and at that moment the Minister will have to decide whether the participant in the tender who was the next highest ranked after the winner will receive the subsidy and permit after all or whether a new tender procedure for the site(s) in question will be organised.

The Subsidy Decision and Permit Have Not Been Determined Yet

Pursuant to the Dutch Offshore Wind Energy Regulation 2015, subsidy can be applied for for the first 700 MW offshore wind energy to be realised at the abovementioned sites Borssele I and II. The grant of the subsidy will take place on the basis of the ranking of the applications, the so-called tender system. The applicant with the lowest cost per kWh will be the highest ranked.

The subsidy for offshore wind energy is based on the General Implementing Rules SDE.[8] As of 1 December 2015 a change hereof has been published in connection with the denial of subsidy during periods with negative energy prices. This change relates to a condition that the European Commission sets in the Guidelines on State aid for environmental protection and energy 2014-2020 for the approval of state aid. This condition implies that member states put in place measures ensuring that generators of renewable energy have no incentive to generate electricity from renewable sources under negative prices. This has resulted in no subsidy being paid over the period in which the hourly rate of the APX is negative, this period being a minimum of six consecutive hours. The volume fed in the network in this period will be deduced from the actual feed-in in the calendar year in question and is entirely disregarded for the grant of subsidy. This is important for banking. Banking means that the subsidy beneficiary may transfer volume from one year to another year if in that year more energy has been produced than the maximum volume that qualifies for subsidy, whereas there is still room in the other year. As the abovementioned volume is entirely disregarded, this volume cannot be transferred to another year either, and in addition hereto this volume will not occupy any space in the calendar year in question and could thus not prejudice the transfer of a volume from another year. This change of the regulation applies to new subsidy decisions, i.e. also to the winner of the first tender.

With the application form for the subsidy a permit for the construction and exploitation of the wind power plant on the site(s) in question is applied for. Before an application is ranked, it is tested whether the application form has been completed in full and the application also meets the requirements set for the remainder. For example, section 14(1) of the Offshore Wind Energy Act requires that the construction and exploitation of the wind power plant can be made in technical, financial and economic respect. This means that the application may be rejected because not all the requirements are met and the application is not ranked for this reason or because the application does not contain the lowest cost.

As both the decision on the subsidy application and the permit are decisions in the meaning of the Dutch General Administrative Law Act, these can be objected to and subsequently the decision on the objection can be appealed against (and this appeal can be appealed against too) within a six weeks' term. This both applies to the decisions in which the applications are rejected and the allocation decision.

Previous judgments have shown that a competing applicant for subsidy can be designated as interested party in a subsidy tender. [9] This would imply that the subsidy applicant whose application has been rejected in a situation like this, in which he is the competitor of the winner of the tender, is a (third) interested party in the decision in which the subsidy has been allocated to the winner and he can thus challenge this. Annulment of the decision to allocate the subsidy and/or the permit would imply that the winner of the tender is no longer entitled to the construction and exploitation or the subsidisation hereof. The rules do not provide for the consequences of the situation in which an applicant successfully challenges the allocation of the subsidy and/or the permit to the winner. The situation may also arise in which an applicant who is not involved in the ranking because he would not meet the requirements set and successfully challenges this decision, subsequently ends up higher in the ranking than the winner of the tender. The rules do not provide for this situation either.

In previous judgments it was also assumed that in the case of a ranking system the applicant can insufficiently defend himself against the higher valuation of other applicants if he does not have the documents of these higher ranked applicants. [10] It is true that in the case of a tender for offshore wind the subsidy is not divided among multiple applicants, but for the challenge of the subsidy allocation the inspection of the documents that led to the allocation will be required.

Closing remarks and conclusion

It is very important that the application form is completed in a correct way and that the completed form and the annexes comply with the requirements set. For this reason, it is advisable to make an appointment with the assessor of the applications, the RVO, the Netherlands Enterprise Agency, (timely) before the closing date of the tender to discuss whether the application meets the requirements. It is true that the assessment of the applications will only start after the closing date of the tender, but the risk that an application is not ranked can be restricted with this.

It applies to the winner of the tender that he must properly account for any proceedings both against the site decisions and against the decisions on the subsidy and permit applications including the decision in which after all he himself has obtained the permit and subsidy.