54745 The World Bank Asia Sustainable and Alternative Energy Program China Meeting the Challenges of Offshore and Large-Scale Wind Power: Regulatory Review of Offshore Wind in Five European Countries China: Meeting the Challenges of Offshore and Large-Scale Wind Power Joint publication of the National Energy Administration of China and the World Bank Supported by the Australian Agency for International Development and ASTAE Copyright © 2010 The International Bank for Reconstruction and Development/The World Bank Group 1818 H Street, NW Washington, DC 20433, USA All rights reserved First printing: May 2010 Manufactured in the United States of America. The views expressed in this publication are those of the authors and not necessarily those of the Australian Agency for International Development. The findings, interpretations, and conclusions expressed in this report are entirely those of the authors and should not be attributed in any manner to the World Bank, or its affiliated organizations, or to members of its board of executive directors or the countries they represent. The World Bank does not guarantee the accuracy of the data included in this publication and accepts no responsibility whatsoever for any consequence of their use. The boundaries, colors, denominations, and other information shown on any map in this volume do not imply on the part of the World Bank Group any judgment on the legal status of any territory or the endorsement or acceptance of such boundaries. Contents Preface.........................................................................................................................................vii Acknowledgments.....................................................................................................................viii .......................................................................................................................................ix Glossary. Executive Summary....................................................................................................................xi 1. Introduction.............................................................................................................................1 2. Market Development..............................................................................................................3 The European Union..................................................................................................................................................7 Denmark. ...................................................................................................................................................................8 Germany.................................................................................................................................................................. 11 The Netherlands......................................................................................................................................................13 .......................................................................................................................................................................20 Spain. The United Kingdom. ...............................................................................................................................................21 Comparative Summary. ...........................................................................................................................................23 .........................................................................................................25 3. Targets and Incentives. The European Union................................................................................................................................................25 Denmark. .................................................................................................................................................................28 Germany..................................................................................................................................................................31 The Netherlands......................................................................................................................................................34 .......................................................................................................................................................................35 Spain. The United Kingdom. ...............................................................................................................................................37 Comparative Summary. ...........................................................................................................................................40 4. Regulatory Framework.........................................................................................................41 Key Applicable Laws and Conventions....................................................................................................................41 The European Union. ........................................................................................................................................42 Denmark. ..........................................................................................................................................................42 Germany. ..........................................................................................................................................................42 The Netherlands...............................................................................................................................................44 Spain................................................................................................................................................................44 The United Kingdom........................................................................................................................................44 Concession Award and Seabed Ownership............................................................................................................45 Denmark. ..........................................................................................................................................................45 Germany. ..........................................................................................................................................................45 The Netherlands...............................................................................................................................................46 Spain................................................................................................................................................................47 The United Kingdom........................................................................................................................................47 Licensing and Consenting.......................................................................................................................................48 Denmark. ..........................................................................................................................................................48 Germany. ..........................................................................................................................................................48 The Netherlands...............................................................................................................................................49 Spain................................................................................................................................................................49 The United Kingdom........................................................................................................................................50 iii iv Contents Government Bodies. ................................................................................................................................................51 The European Union. ........................................................................................................................................51 Denmark. ..........................................................................................................................................................51 Germany. ..........................................................................................................................................................52 The Netherlands...............................................................................................................................................52 Spain................................................................................................................................................................54 The United Kingdom........................................................................................................................................54 Grid Access.............................................................................................................................................................56 The European Union. ........................................................................................................................................56 Denmark. ..........................................................................................................................................................56 Germany. ..........................................................................................................................................................57 The Netherlands...............................................................................................................................................58 Spain................................................................................................................................................................59 The United Kingdom........................................................................................................................................59 Power Offtake. .........................................................................................................................................................60 Denmark. ..........................................................................................................................................................60 Germany. ..........................................................................................................................................................60 The Netherlands...............................................................................................................................................60 Spain................................................................................................................................................................60 The United Kingdom........................................................................................................................................61 Specific Environmental Regulations........................................................................................................................61 The European Union. ........................................................................................................................................61 Denmark. ..........................................................................................................................................................62 Germany. ..........................................................................................................................................................62 The Netherlands...............................................................................................................................................63 Spain................................................................................................................................................................63 The United Kingdom........................................................................................................................................63 5. Drivers, Barriers, and Experiences......................................................................................65 Denmark. .................................................................................................................................................................65 Germany..................................................................................................................................................................66 The Netherlands......................................................................................................................................................69 Spain........................................................................................................................................................................70 The United Kingdom. ...............................................................................................................................................71 Other Countries. ......................................................................................................................................................73 Belgium............................................................................................................................................................73 Ireland.............................................................................................................................................................. 74 France. .............................................................................................................................................................. 74 Sweden............................................................................................................................................................75 Comparative Summary. ...........................................................................................................................................77 6. Conclusions...........................................................................................................................79 .............................................................................................................................................79 Avoiding Past Failures. Requirements for Success......................................................................................................................................80 ..................................................................................................................................83 References. ..............................................................91 Appendix A. Consents Timing, the United Kingdom. Appendix B. Consents Experience, Germany..........................................................................93 Appendix C. Consents Experience, The Netherlands..............................................................95 Contents v Figures 1  World Offshore Wind Installed Capacity, May 2009. ..........................................................................................3 2  Location of European Offshore Wind Projects, June 2008................................................................................4 3  Cumulative Offshore Wind Capacity Since 1990. ...............................................................................................4 4 Published Capital Costs for Offshore Wind Projects..........................................................................................5 5 European Wind Energy Capacity—Onshore and Offshore, End of 2007...........................................................7 6 Wind Energy Installation in Germany—Historic Data and Projections.............................................................16 7 Overview of Offshore Wind Project Progress in The Netherlands...................................................................18 8 Overview of Application Process in The Netherlands. ......................................................................................18 9 Project Depth and Distance to Shore. ..............................................................................................................23 10 Greenhouse Gas Emission Reduction Targets across Europe. .........................................................................25 11 National Renewable Energy Targets across Europe.........................................................................................28 12 Development in Renewable Energy Use in Denmark in Percentage of Total Energy Consumption................30 13 GHG Emissions................................................................................................................................................32 14 Contribution to CO2 Emissions Reductions. .....................................................................................................32 15 Feed-In Tariff.....................................................................................................................................................33 16 Greenhouse Gas Emission Trends and Projections in Europe, 2007................................................................36 17 Average ROC Value and RO Compliance, 2002/3–2006/7. ...............................................................................38 18 Average ROC Sale Price at Auction, 2002–08..................................................................................................38 19 UK Spot Power Prices......................................................................................................................................40 20 Zones from UNCLOS, 1982.............................................................................................................................41 21 Denmark’s “One-Stop-Shop” Consenting Mechanism....................................................................................43 22 Permitting Procedure in Spain..........................................................................................................................46 23 Structure of UK Consenting Bodies.................................................................................................................55 24 Average Value of Swedish Renewable Energy Certificates..............................................................................77 A–1 ..................................................................................................91 Consents Timing Summary, United Kingdom. Tables 1 Operational and Consented Offshore Wind Farms in Denmark.........................................................................9 2 Headline Results from Future DEA Offshore Recommendations....................................................................10 3 ............................................................................................................................................. 11 Installed Projects. 4 Meteorological Measurement Masts. ..............................................................................................................12 5 Offshore Wind Farm Projects in the North Sea—Borkum 1 Group..................................................................13 6 Offshore Wind Farm Projects in the North Sea—Borkum 2 Group..................................................................14 7 Offshore Wind Farm Projects in the North Sea—Helgoland 1 Group..............................................................15 8 Offshore Wind Farm Projects in the North Sea—Sylt/Helgoland 2 Group. .......................................................15 9 Baltic Sea Wind Farms.....................................................................................................................................16 10 Available Area for Offshore Wind in the Dutch Exclusive Economic Zone.......................................................17 11 Operational Offshore Wind Farms in The Netherlands.....................................................................................17 12 Accepted Wind Farm Applications Undergoing Assessment...........................................................................19 13 Rejected or Withdrawn Wind Farm Applications..............................................................................................19 14 Wind Farm Applications Currently under Review. ............................................................................................19 15 Details of Current and Consented UK Projects................................................................................................21 16 Comparative Summary—Market Development...............................................................................................24 17 Greenhouse Gas Emission Reduction Targets across Europe (Original Agreement; EU 15 Countries). ...........26 18 Greenhouse Gas Emission Reduction Targets across Europe (Additional Agreement; Select EU 10 Countries and Malta and Cyprus). ...............................................................................................26 19 Draft Targets for National Renewable Energy in Europe. ..................................................................................27 20 Overview of German Tariff Laws......................................................................................................................33 21 Offshore Feed-In Tariff......................................................................................................................................34 vi Contents 22 Summary of Proposed UK ROC Banding.........................................................................................................39 23 Comparative Summary—Targets and Incentives.............................................................................................40 24  Alternative Consenting Routes for UK Offshore Wind Projects.......................................................................50 25  Areas of Interest That Must Be Addressed by the Danish Consenting Process..............................................51 26 Government Bodies with Responsibility for Offshore Wind Energy, Denmark................................................52 27 Federal and Regional Government Bodies with Responsibility for Offshore Wind Energy, Germany..............53 28 Stakeholder Committees and Federal and Regional Development Agencies, Germany..................................53 29 Spanish Government Bodies with Responsibility for Offshore Wind Energy...................................................54 30 Typical UK Consenting Timeline for Offshore Wind Projects............................................................................55 31 Eligible Substations for the Grid Connection of Offshore Wind Farms............................................................57 32 Belgian Offshore Wind Legislation...................................................................................................................73 33 Swedish Offshore Wind Farms in Operation. ...................................................................................................76 34  Swedish Offshore Wind Farms in Planning.....................................................................................................76 35  Value of Subsidy (Miljöbonus) for Onshore Wind and Offshore Wind..............................................................77 36 Comparative Summary—Drivers, Barriers, and Experiences...........................................................................78 A–1 Consents Timing Summary, United Kingdom. ..................................................................................................92 B–1 Permitting Progress for Borkum West Offshore Wind Farm............................................................................93 B–2 List of Borkum West Offshore Transmission Cable Permits.............................................................................93 B–3 Permitting Progress for Borkum Riffgat. ...........................................................................................................94 B–4 Permitting Progress Kriegers Flak....................................................................................................................94 C–1 List of Permits for Egmond Offshore Wind Farm.............................................................................................95 C–2 List of Permits for Q7 Offshore Wind Farm.....................................................................................................96 C–3 Program for Egmond Offshore Wind Farm. ......................................................................................................96 Preface This publication is the result of a joint effort of the Government of China and the World Bank. The objective of this effort, implemented with support from the Australian Agency for International Development (AusAID) and the Asia Sustain- able and Alternative Energy Program (ASTAE), was to gather lessons learned from international experience in large- scale onshore and offshore wind power development, with a view to informing China’s strategy going forward. This effort resulted in two publications: 1. The first publication, Regulatory Review of Offshore Wind in Five European Countries, provides a detailed descrip- tion and evaluation of the regulatory approaches that various countries in Europe have taken to develop offshore wind energy. 2. The second publication, Strategic Guidance, defines a roadmap for the promotion of offshore and large-scale onshore wind developments in China, and summarizes the messages emerging from a high-level workshop held in Beijing. Garrad Hassan and Partners Limited was commissioned by the World Bank to undertake research and analysis in sup- port of this effort. Both publications rely on investigations undertaken by Garrad Hassan and Partners Limited for the World Bank. The current publication is the first of the two, and was prepared by Garrad Hassan and Partners Limited. Data provided in this report and its annexes are current as of May 2009, unless otherwise indicated.1 The second report, which is a companion to this one, was published separately under the ASTAE Technical Report Series. 1. Readers are reminded that, given the pace of development in offshore wind development, some of the tables may be out of date by the time of printing. vii Acknowledgments This publication is the product of a joint activity of the National Energy Administration (NEA) of the People’s Republic of China and the World Bank. Its objective was to develop implementation guidance for large-scale onshore, intertidal, and offshore wind farm development in China. Andrew Garrad, Andrew R. Henderson, Colin Morgan, and Joseph L. Phillips from Garrad Hassan and Partners Limited were the major contributors to this publication. The World Bank team working on this activity—Noureddine Berrah, Richard Spencer, Ranjit Lamech, Yanqin Song, and Defne Gencer—would like to give special recognition to the staff of the Project Management Office of the Energy Research Institute (ERI) of the National Development and Reform Comission (NDRC), staff of the Government of China–World Bank–GEF China Renewable Energy Scale-Up Program (CRESP), to peer reviewers Anil Cabraal and Soren Krohn, to editor Rebecca Kary, and to designer Laura Johnson. This activity was supported by AusAID and ASTAE. The World Bank team appreciates the support provided by AusAID—both in financial resources and substantive inputs from its staff—namely, Alan Coulthart, Brian Dawson, and Tim Suljada. The team wishes to acknowledge the support from ASTAE in preparing this report for publication and dis- semination. The team is thankful to Clive Harris, Frédéric Asseline, and Laurent Durix for their effective coordination of the process of cooperation with these valued partners. The World Bank team greatly appreciates the support from Junhui Wu and Ede Ijjasz, who encouraged the pursuit of this topic and provided the resources to make this publication possible. Finally, the NEA and World Bank teams would like to call attention to the leadership and guidance of Zhang Guobao, Administrator of the NEA. His vision and encouragement helped steer this effort to its ultimately successful outcome. viii Glossary AER Alternative Energy Requirement Programme (Ireland) AusAID Australian Agency for International Development BERR Department for Business, Enterprise and Regulatory Reform (UK government department) BfN Bundesamt für Naturschutz (Federal Agency for Environmental Protection, Germany) BMU Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit (The Federal Environment Ministry, Germany) BoP Balance of Plant—all elements of a wind farm other than the turbines BSH Bundesamt für Schifffahrt und Hydrographie (Federal Maritime and Hydrographic Agency, Germany) BWEA British Wind Energy Association CCL Climate Change Levy (UK tax on high energy users) CDM Clean Development Mechanism CE The Crown Estate (UK body that retains responsible for concessionary award) CHP Combined heat and power CNE Comisión Nacional de Energía (Spain)(National Energy Commission) Contiguous Zone Area between 12 and 24 miles from the coast—limited law enforcement rights COWRIE Collaborative Offshore Wind Research into the Environment (UK body) CPA Coastal Protection Act (UK legislation) CRE Commission de Régulation de l’Énergie (France) (Energy Regulatory Commission) CRESP China Renewable Energy Scale-Up Program DBERR Department for Business, Enterprise and Regulatory Reform (UK government department) DEA Danish Energy Authority Defra Department for Environment, Food and Rural Affairs (UK government department) dena Deutsche Energie-Agentur (German Energy Agency) DfT Department for Transport (UK government department) DNZ Directie Noordzee (The Netherlands) (North Sea Directorate) DTI Department of Trade and Industry (UK government department) EA Electricity Act (UK legislation) ECN Energy Research Centre of The Netherlands EEG Erneuerbare-Energien-Gesetz (Germany) (The Renewable Energy Sources Act) EIA Environmental Impact Assessment (statutory process for projects in the European Union) EIS Environmental Impact Statement EEZ Exclusive Economic Zone—area extending 200 nautical miles from the coast EPC Engineering Procurement Construction—single contract for delivery of project ERI Energy Research Institute EU European Union FEPA Food and Environment Protection Act (UK legislation) FINO Forschungsplattformen in Nord- und Ostsee (Research Platforms in the North and Baltic Seas) FIT Feed-in tariff GHG Greenhouse gas GIS Geographic information system GW Gigawatt HSE Health and Safety Executive (UK government body administering the HSW Act) HSW Health and Safety at Work Act—primary UK health and safety legislation JI Joint Implementation km Kilometer kV Kilovolt kWh Kilowatt-hour ix x Glossary m Meter MCEU Marine Consents and Environment Unit—UK department within DfT and Defra MEP Milieukwaliteit Elektriciteitsproductie (The Netherlands)—support mechanism for environmentally friendly electricity production MUMM Management Unit of the North Sea Mathematical Models (Belgium) MW Megawatt—installed power capacity of turbine or project MWh Megawatt-hour—unit of electrical energy NDRC National Development and Reform Commission (China) NEA National Energy Administration (China) nm Nautical mile NSW Near Shore Wind Farm (Netherlands) O&M Operations and maintenance Ofgem Office of the Gas and Electricity Markets—the UK gas and electricity regulator OMEL Operador del Mercado Ibérico de Energía (Spain)—market operator ORCU Offshore Renewables Consents Unit—UK government department within DTI PPI Programmation pluriannuelle des investissements (France) (Multiyear Investment Program) PV Photovoltaic(s) PWA Public Works Act R&D Research and development RAB Renewables Advisory Board—UK information coordination body RE Renewable energy REE Red Eléctrica Española (Spain)—grid operator REFIT Renewable energy feed-in tariff RO Renewables Obligation—UK market mechanism for encouraging renewable ROC Renewables Obligation Certificate—UK tradable “green certificate” SDE Stimuleringsregeling duurzame energieproductie (The Netherlands) (Sustainable Energy Production Incentive Programme) SEA Strategic Environmental Assessment SSSI Site of Special Scientific Interest—UK legal designation for protected areas Territorial waters Waters within 12 nautical miles of the coast—full national legal jurisdiction TSO Transmission system operator TWA Transport and Works Act—UK legislation TWh Terawatt-hour UBA Umweltbundesamt (Germany) (Federal Environment Agency) UNCLOS United Nations Convention of the Law of the Sea V Volt V&W Verkeer und Waterstaat (The Netherlands) (Ministry of Transport, Public Works and Water Management) Wbr Wet beheer rijkswaterstaatswerken—Dutch law governing federal waters (Public Works and Water Management Act) WTG Wind turbine generator Executive Summary The objective of this study is to review international expe- Targets and Incentives rience in offshore wind power development and draw on the lessons learned from the experience of different National renewable energy (RE) targets and incentive countries. To date, that experience has predominantly schemes have been examined for the five countries of been limited to Europe. Significantly different regulatory interest in the context of international commitments and and physical planning approaches have been taken in the policy drivers. Germany and the United Kingdom have the different countries. Hence, the experience is particularly most ambitious plans for offshore wind of the national helpful in providing suggestions for a new market. markets examined, with an aspiration for installation of 25 GW by 2030. From the point of view of incentives, This study provides a review of the market and regulatory Germany has perhaps by a small margin the most attrac- approaches taken by the various different active Euro- tive of the national markets considered, with increased pean countries and provides some conclusions about revenue support for offshore wind announced recently. the efficacy of the different approaches. The study also However, the premiums offered in Ireland, Spain, and the makes recommendations to develop suggested best United Kingdom are very similar. Denmark has in place a practice for the regulation of offshore wind. firm plan for the gradual deployment of offshore wind projects, with sites defined out to 2025, and the tender The five national markets examined for the study are process for the next project commencing. The Nether- those with arguably the greatest long-term offshore wind lands also has relatively ambitious targets for offshore energy potential: Denmark, Germany, The Netherlands, wind deployment, although the incentive scheme (and Spain, and the United Kingdom. regulation) is considered insufficient to achieve this. Market Development Regulatory Framework The historical development of offshore wind has been Various aspects of offshore wind regulation are con- described for each of the countries of interest. The great- sidered in the study, including relevant legal provision, est deployment to date has been in Denmark where, concessionary award systems, consenting processes, along with Sweden and The Netherlands, much of the and access to the grid. A large diversity was found from early deployment took place. The United Kingdom took country to country with existing national regulatory struc- the lead at the end of 2007 , with a reasonable pipeline tures utilized for offshore wind development even when of projects coming online before 2010. The transition they were, in general, originally developed to regulate from a dominance of research and development (R&D) other industries. This has led to mixed results, with the projects (with a strong academic involvement and public most successful countries being those that have actively funding) to demonstration schemes (led by commercial reformed regulatory systems to encourage offshore entities with some funding support) has been described, wind deployment: Denmark, Germany, and the United with the most significant projects highlighted. Kingdom. The reason for the slower-than-anticipated development of the industry has been discussed in terms of the key Drivers, Barriers, and Experiences stumbling blocks. It is notable that these have mainly been commercial in nature rather than the result of tech- For each of the five countries examined, experience to nical or regulatory difficulties. In particular, the issue of date with offshore wind has been analyzed with respect rising capital costs because of a number of commercial to driving factors and regulatory barriers that exist. factors has been the most significant impediment. This effect is common to all national markets. xi xii Executive Summary In Denmark, a successful indigenous wind turbine indus- renewable technology (currently onshore wind) has dom- try was identified, along with generally high levels of inated. In general, the government has been receptive to political support, as the most important drivers for off- reform in order to facilitate and encourage offshore wind shore wind. Denmark has led the world in the develop- power deployment. ment of offshore wind and has in place a relatively stable and mature regulatory regime that was achieved through simplification, centralization, and long-term strategic Conclusions planning. Based on the review of experience in the five countries, In Germany, the successful deployment and impending conclusions were drawn in the form of generic findings saturation of onshore wind has led to a shift in political that constitute best practice for offshore wind project focus to offshore wind deployment. Highly ambitious regulation. Some of the conclusions may not be relevant plans are in place for deployment over the next two to the offshore activities in China, but they are neverthe- decades, with the feed-in tariff having been raised recently less informative. to levels that generated a flurry of project transactions. The effects of the predominance of relatively small com- panies in the offshore arena in Germany have delayed to Appropriate Legislative Frameworks a certain extent the initiation of large-scale construction Coordinated industry lobbying of the government is the of offshore wind farms. However, the presence of sev- most effective way to achieve the required regulatory eral large European utilities and developers with offshore reform, although in the absence of genuine political sup- wind experience elsewhere means that the first projects port for offshore wind, this is unlikely to be enough to can confidently be online by 2010. It can be argued that bring about necessary changes. the small developers did play a major role in achieving a relatively high degree of consenting success. Effective Industry Coordination In The Netherlands, offshore wind represents the most The development of strong, united, and influential indus- promising means of achieving significant deployment of try associations provides the coordination necessary to renewables, given the limited potential for onshore wind have a significant impact on government policy and regu- capacity. However, given that in the short term the coun- lation of offshore wind deployment. try is on track to achieve international commitments on climate change, and given the apparent high costs asso- ciated with necessary grid reinforcement works, politi- Transparency of the Grid Access Process cal support for offshore wind remains questionable. In the absence of clear political support, deployment will Access to the grid is a significant barrier to offshore wind be limited, and the necessary reforms to regulation will energy, unless its regulation is aligned to RE policy objec- be difficult to implement. In addition, the historical and tives, and the responsibility for costs and construction is ongoing instability and unnecessary complexity of incen- clearly delineated at an early stage. tive support for RE constitute a significant barrier for the offshore wind industry in this country. Political and Regulatory Stability There are good prospects for offshore wind in the United Repeated reform of regulations has hindered develop- Kingdom despite the much slower-than-anticipated ment and can be avoided if they are well drafted in the development of the industry. The strong level of politi- first instance. New markets for offshore wind should draw cal support for the technology has been proven through heavily on experience in other countries. A stable regula- the inception of two successive rounds of concession- tory regime engenders greater investor confidence. ary awards, streamlining of the consenting process, and recently the announcement of additional revenue support Appropriate Site Awards for offshore wind projects. Access to the grid has been a significant barrier for some offshore wind projects. The Technoeconomic and environmental feasibility for off- nonalignment of electricity regulation with government shore wind should be assessed at the national strategic energy policy has been a problem. Inherent deficien- level before awarding any sites for development. The cies in a nontechnologically differentiated RE certificate system for such award would benefit from allowing for a trading system have been discussed in the context of mix of large companies and small entrepreneurial devel- experience in the United Kingdom, where the cheapest opers to stimulate growth. Executive Summary xiii Strong Political Will Capital Support and Grid Ownership Although effective industrial coordination and lobbying Capital support for the first offshore wind projects in any can play an important role in specific regulatory issues, national market is important in order to achieve early in the absence of genuine political ambition to deploy momentum. Transfer of grid connection costs to network RE—and specifically offshore wind—little progress can operators is an important support mechanism in markets be made. where such costs are prohibitively high. Prescreening of Sites Incentives: Fixed Feed-In Tariff versus A systematic evaluation of potential sites is a helpful start- Certificate Trading ing point. This should be a technically rigorous assess- Experience has shown that both systems can work, ment of the wind resource through both computational although on balance a feed-in tariff is considered to be a modeling and full-scale assessment. The evaluation of more effective instrument for encouraging deployment wind resource should be coupled with the identification because of the simplicity and long-term certainty of the and evaluation of constraints. Compilation of all these system. data into a single geographic information system (GIS) has been demonstrated to be very helpful. Encouragement of Technical Innovation Coordination of Stakeholder Interests Technical innovation should be encouraged in order to bring down the costs of offshore wind energy in the medium Many stakeholders, both commercial and governmental, and long term. This can be facilitated through continued have interests in and influence on offshore wind develop- funding of R&D and demonstration projects with a focus ment. Identification and coordination of these stakehold- on offshore-specific technological solutions. ers are essential. Allowing Foreign Involvement Simplification and Centralization Access to national markets for foreign companies should Simplification of regulation provides the necessary trans- be provided where skills and experience are lacking parency and confidence to industry so that it can move domestically. The benefits of this approach in terms of forward with development of offshore wind. Significant deployment volume and knock-on learning are of signifi- efficiency gains can also be made through the adminis- cant value. tration of the regulatory regime by a single government agency through the mitigation of user conflicts and align- ment of government strategic objectives. International Competition Any entrance of a new national market for offshore wind Strategic Spatial Planning requires a regulatory framework and market incentives that are sufficiently attractive to international develop- Long-term strategic planning for the future use of off- ers and contractors to be competitive with existing shore regions can improve the prospects for offshore markets. wind deployment through the avoidance of potential stakeholder conflicts and improvement in grid connec- tion efficiency. 1 Introduction This study constitutes a review of the regulatory frame- on the characteristics of the most effective systems. At work for offshore wind development in different coun- the same time, it has been recognized throughout that tries. The objective of this effort is to gain information a single model is unlikely to provide the “best fit” for all and derive lessons learned from international experience countries, given national differences. to date. Chapters 2, 3, and 4, focusing on market development, The following issues are covered for Denmark, Germany, targets and incentives, and regulatory framework, The Netherlands, Spain, and the United Kingdom: respectively, provide background information on each country studied. These chapters are primarily descriptive • Market development in nature. • Targets and incentives • Regulatory framework Chapter 5 provides a discussion of the lessons that can • Drivers, barriers, and experiences. be learned from the experience in each national market, as well as the underlying incentives (or drivers) for over- Although Spain has not developed any offshore wind coming barriers and deploying offshore wind capacity in farms to date, a considerable amount of thought has each case. been applied to potential development and, given Spain’s remarkable success in developing onshore projects and Chapter 6 draws this experience together as it identi- the wind industry as a whole, the Spanish approach is fies and summarizes recurring themes and uses them considered valuable to this study. to develop suggested best practice for the regulation of offshore wind. The study focuses on describing the past, present, and planned future regulatory regime in each country. Both A glossary is included that explains important terms and positive and negative experiences to date have been abbreviations used within the report. The appendixes explored in the context of regulatory arrangements, summarize the actual consenting experience in a num- and they have been used to draw general conclusions ber of countries. 1 2 Market Development Development of national markets for offshore wind proj- under construction at the time of writing. Figure 1 pres- ects to date has been highly varied in terms of structure ents a breakdown of these totals by national market. and results. This is partly because of a lack of industry maturity. Perhaps more important, however, are differ- As evidenced by Figure 1, the industry is currently ences driven by national policy objectives and existing undergoing a period of rapid growth, with the majority legislative arrangements. This chapter provides an over- of construction occurring in the United Kingdom. With view of the historic development, current status, and the exception of a small demonstration project in Japan, future prospects of the offshore wind market in general Europe is host to all the offshore wind projects built before providing more specific details for the five coun- or under construction as of the time of this report, as tries of interest. shown in Figure 1. A total of 1,240 MW of offshore wind farms are currently Offshore wind projects constructed to date can be cate- in operation around the world, with a further 704 MW gorized into two groups corresponding to two sequential World Offshore Wind Installed Capacity, May 2009 Figure 1:  United Kingdom Denmark Belgium 598 MW, 42% 423 MW, 29% 30 MW, 2% Germany 60 MW, 4% Denmark 209 MW, 14% Germany 12 MW, 1% Sweden 133 MW, 9% Ireland 25 MW, 2% Netherlands United Kingdom 247 MW, 17% 1,243 MW, 80% Source: Garrad Hassan and Partners Limited. 3 4 Regulatory Review of Offshore Wind in Five European Countries phases of industry development: R&D and demonstra- tion. Today the first quasi-commercial projects are being Location of European Offshore Figure 2:  contracted ready for construction over the coming Wind Projects, June 2008 years. From R&D to Demonstration The first offshore deployment of a wind turbine took place at Nogersund, Sweden, in 1990. Over the next decade, a series of R&D deployments followed in Denmark, The Netherlands, Sweden, and the United Kingdom that were largely publicly funded with significant academic involvement. This phase ended perhaps in 2002 with the construction of the 160 MW Horns Rev offshore wind project that constituted a major ramp-up in the scale of deployment over the previous largest offshore project, which was 40 MW (Figure 2). Source: Garrad Hassan and Partners Limited. The demonstration phase has continued since then with a significant further deployment in Denmark (Nysted—166 A False Dawn MW) followed by several projects in the United King- dom. These demonstration projects can be categorized Following what may be described as the “Danish surge” as being funded primarily commercially with some level in the early years of this decade, consisting of the dem- of capital and revenue support from the government. Fig- onstration projects at Horns Rev and Nysted, the growth ure 3 clearly shows the transition between these phases rate of the industry slowed substantially for the three- from 1999 to 2001. year period from 2004 to 2006, with just one project Cumulative Offshore Wind Capacity Since 1990 Figure 3:  Demonstration 1,500 R&D 1,250 Demonstration Dominated Cumulative Installed Capacity (MW) R & D Dominated 1,000 750 500 250 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source: Garrad Hassan and Partners Limited. Market Development 5 completed in each of those years—all in the United King- manufacturers have stopped offering EPC2 contracts for dom (Scroby Sands, Kentish Flats, and Barrow). Since offshore wind farms, forcing developers to take on more then, construction momentum has recovered thanks technical and commercial risks within a multicontract largely to renewed activity in The Netherlands and Swe- framework, and offshore contractors have yet to step in den. This has augmented ongoing efforts in the United to fill this void. The last point is related to the mixed early Kingdom. project experience, which is discussed further below and which has led to the lengthy delay of many of the more It is noteworthy that despite the strong growth rate cur- advanced offshore wind projects while contracts were rently exhibited, the offshore wind industry was widely renegotiated. anticipated to deliver substantially greater installed capacities between 2004 and 2006. As recently as 2005, the total installed capacity for offshore wind by the end Rising Costs of 2007 was predicted to be 3.6 GW [1] by a leading Figure 4 is based on published cost data. It illustrates industry analyst, whereas the actual total was about one- the unanticipated upward trend in offshore project capital third of this figure. costs. Three main reasons exist for this false dawn. First, and There are four principal reasons for this trend: with the benefit of hindsight, offshore growth projec- tions since 2000 have been optimistic primarily because 1. Initial fierce competition and losses of an overestimation of learning effects and associated The initial high degree of optimism for future off- cost reductions. Second, since the early demonstration shore wind led to fierce competition between turbine projects, costs have in fact increased, which has meant that many marginally economic sites have become 2. Engineering Procurement Construction (EPC): Used to imply a unfeasible under current conditions. Third, wind turbine single point of responsibility to deliver a turnkey project. Figure 4: Published Capital Costs for Offshore Wind Projects 4.0 Greater Gabbard 3.5 Nordergründe Rhyl Flats 3.0 Princess Amalia (Q7) Alpha Ventus Baltic I 2.5 Project CAPEX (�M/MW) Lely LID Horns Rev II Vindeby Tuno Knob North Hoyle Barrow 2.0 Bockstigen Egmond Horns Rev Robin Rigg Scroby Sands Blyth Nysted Kentish FlatsLillgrund 1.5 Utgrunden Middlegrundden Irene Vorrink Yttre Stengrund Samsø 1.0 Operational Under construction Contracted 0.5 Bubble area represents capacity of wind farm 0.0 1990 1995 2000 2005 2010 Source: Garrad Hassan and Partners Limited. 6 Regulatory Review of Offshore Wind in Five European Countries manufacturers and installation contractors for the governmental support if they are to gain enough momen- early demonstration phase projects. In an attempt to tum to achieve a substantive impact. It is clear that the establish a good market position, optimistically low supply constraints took place before there was any sub- EPC contract prices were offered. Be it the result stantial manufacturing capacity in China. of a deliberate policy of “loss leading” or inadver- tent cost optimism, it is unlikely that the principal contractors turned a profit on these early contracts. The Future—Sink or Swim This result has led to somewhat of a backlash—with Following the first two phases of industry development contractors readjusting tender prices to ensure that outlined above (R&D and demonstration-dominated), it profit margins are met. can be seen that a third phase is emerging, which may be termed commercial expansion. Such projects will be 2. Price rises in the overall wind turbine market those that benefit from some form of revenue support, Since 2005 there has been a significant rise in tur- but that are not eligible for capital support. The UK Round bine prices for both onshore and offshore wind proj- 2 and German Pilot Projects may be the first to be built ects. This has been caused to a large extent through in this third phase, although it is notable that both are supply not keeping up with demand, leading to low likely to be subject to increased levels of revenue sup- competition. In particular, shortages of key wind tur- port in the absence of the anticipated downward cost bine subcomponents, such as gears, large bearings, trend for offshore wind technology, so that in fact, this transformers, castings, forgings, and carbon fiber, transition is perhaps somewhat arbitrary. A more notable has limited the supply capacity growth rate in the difference between Phase 2 (demonstration) and Phase face of steeply increasing demand. 3 (commercial) projects is likely to be their scale, with the latter typically reaching an installed capacity of several 3. Greater risk and lower profitability in the offshore wind hundred megawatts. turbine market Currently, the market for offshore wind turbines is New markets for offshore wind are likely to reach a level largely coincident with that for onshore projects of commercial viability and regulatory maturity within the in terms of both products and players. However, next decade. In Europe, these are likely to include France given the additional risks associated with supplying and Spain, where recent legislative and policy changes machines offshore and the high demand for turbines indicate some degree of potential for significant deploy- onshore, manufacturers currently have a limited ment. Beyond Europe, prospects are currently unclear, incentive to bid competitively for supply contracts although there has been significant, albeit nascent or for offshore wind projects. If the choice is between sporadic, offshore wind project development activity in 250 MW in the North Sea and 250 MW in Texas, the Canada, China, Korea, Taiwan (China), and the United choice of Texas is clear. States, as evidenced by this report. However, unless there is substantial activity in China, the vast majority of 4. Balance of Plant (BoP)3 supply chains. new offshore wind projects likely to come online in the Certain BoP items and equipment required for off- next decade will be built in Europe, with the majority of shore wind projects are currently in short supply. these being established in UK or German waters. Of particular note are installation vessels, subsea cables, and project transformers. This shortage has Another possibility in the coming years is the re-emer- led to low competition and high prices in specific gence of EPC contracting, with the entrance of specialist parts of the BoP supply chain. contractors prepared to target project management risk as a means of generating profit. All other things being All of these causes may be mitigated over the next few equal, this is likely to have the effect of increasing project years if market forces redress imbalances in the supply prices as interface and management risk is passed from chain. In addition, a true bifurcation in wind turbine design owner to contractor. However, this may enable owners to is likely to be required, which will result in offshore-spe- realize their offshore project pipeline more quickly by not cific products and, to a greater or lesser extent, supply having to manage such risks in-house. chains. This will allow the establishment of a separate offshore wind market that is not subject to overwhelming There is good potential for reducing project costs through supply competition from the onshore wind industry. Both technical innovation. Several areas may be targeted of these mitigating factors are likely to require additional on this front, including wind turbine design and instal- lation methods. Some evidence of the former has sur- 3. Balance of Plant: project elements other than the turbine. faced with the emergence of a limited number of new Market Development 7 offshore-specific wind turbine designs and manufactur- imports, as well as to aid progress toward Kyoto targets, ers. In addition, technology demonstration projects, such with wind energy being critical and expected to make the as Beatrice in the United Kingdom and Alpha Ventus in largest contribution toward electricity supply among the Germany for deeper water development, are designed to RE candidates according to the 2007 Renewable Energy accelerate the deployment of new approaches to design Road Map [27]. and installation, and they have the potential to make a significant contribution in this regard. In 2007 , slightly more than 8,500 MW of new wind energy capacity was added in Europe, with around 200 MW of Finally, it is anticipated that an increased level of competi- this being offshore [7]. The total generating capacity at tion will develop within certain parts of the project supply the end of 2007 was more than 55 GW, representing a chain, with new entrants and equipment coming online rise of 18 percent over the previous year, of which about as the industry gathers momentum. This will happen only 1 GW is offshore. It is clear that offshore is still a minor if a consistent market is developed that is free from the part of the mix. stop-start characteristics that have existed to date. Figure 5 illustrates how two countries in particular con- tinue to dominate the industry in Europe: Germany and The European Union Spain. As this report shows, Germany is expected to play a leading role in the offshore wind energy industry as Europe is heavily dependent on imports for its energy, well, not only in terms of projects, but also of technology. with about 50 percent originating from outside its com- Spain may also enter this field, although this is unlikely to mon borders. With indigenous hydrocarbon reserves occur immediately, because of a number of country-spe- in the North Sea rapidly being extracted, this figure is cific characteristics and constraints, not least of which is expected to rise to 70 percent in the next couple of the substantial remaining capacity suitable for develop- decades [28]. There is a perception that Europe is enter- ment onshore in that country. ing a new energy era, where new objectives of sustain- ability, competitiveness, and security of supply will apply, Other countries are expected to host significant new off- and risk mitigation will be of increasing importance [25]. shore wind capacity, in particular the United Kingdom, followed by Denmark and The Netherlands and possibly RE has been given an important and high-profile role France, Ireland, and Sweden as well. This should bring within the Europe-wide strategy to reduce reliance on some much needed diversification to the wind industry Figure 5: European Wind Energy Capacity—Onshore and Offshore, End of 2007 Germany, 1,667 MW, 20% Spain Spain 15,145 MW, 27% 3,522 MW, 42% France, Denmark 888 MW, 10% 3,125 MW, 6% Italy 2,726 MW, 5% Italy France 603 MW, 7% 2,454 MW, 4% Portugal United Kingdom 434 MW, 5% 2,389 MW, 4% Germany, Portugal United Kingdom 22,247 MW, 38% 2,150 MW, 4% 427 MW, 5% Netherlands, Sweden Others 1,746 MW, 3% Others 217 MW, 3% 2,700 MW, 5% Greece 338 MW, 4% 871 MW, 2% Austria Greece Poland Netherlands 982 MW, 2% 125 MW, 1% 123 MW, 1% 210 MW, 2% Source: [7]. 8 Regulatory Review of Offshore Wind in Five European Countries in further countries and regions, a major new market, and wind established in 1997 [41]. In connection with these possibly technologies, if offshore specific wind turbines two projects, a comprehensive environment program become available. was established [40]. Private Development Denmark The only 100 percent private (that is, without the par- Pilot Projects ticipation of utilities) offshore project was established in 2003 at Rønland, Harboøre. In this project, a total of eight In 1991, the Danish company Elkraft established a 5 MW wind turbines were deployed in a nearshore location. test plant at Vindeby. In 1995, Elsam followed suit and Fifty percent of the project is owned by a cooperative. established a 5 MW wind power plant at Tunø Knob. The effect of the offshore wind turbines on the environ- Research Project in Frederikshavn ment at Vindeby and Tunø Knob was studied during instal- lation and into operation. These studies indicated that In 2003, a consortium of MBD Offshore Power, Aalborg offshore wind turbines did not have a significant impact University (AAU), and DONG Energy established three on the environment. However, the potential impact of wind turbines at the harbor area at Frederikshavn with large offshore wind farms was not addressed during this the purpose of studying different support structure environmental monitoring campaign. Therefore, in con- concepts. nection with the demonstration program for the next two large wind farms (Horn Rev 1 and Nysted/Rødsand Cancelled Projects 1), a number of additional studies were implemented to observe the effect of the wind farms on the environment In 1997 , a national committee identified areas for five [40]. demonstration offshore wind projects, totaling 750 MW, to be developed by the utilities by 2007 under agreement with the government and approved by the European Agenda 21 Project Union. The five demonstration project areas are also the In December 1999, after a full environmental assess- basis for the further development, with a target build-out ment, the Danish Energy Authority (DEA) approved an rate (on average) of 150 MW per year up to 4,000 MW offshore wind farm at Middelgrunden 3.5 km outside of by 2030. Copenhagen harbor that consisted of 20 wind turbines, with a total installed capacity of 40 MW. The project was By 1999, the utilities received preliminary approvals for developed by a partnership between Middelgrundens four of the five “demonstration” offshore wind farms— Vindmøllelaug (a community partnership) and the Copen- Horns Rev, Læsø, Omø Stålgrunde, and Rødsand/ hagen Utility Københavns Energi (later Energi E2; today Nysted—which triggered environmental and technical DONG Energy). studies. In 2002, the order for three of the five demonstration The Renewable Energy Island projects, where construction had not commenced, was The Samsø offshore wind turbine project was installed revoked (Læsø, Omø Stålgrunde, and Gedser Rev). This during the autumn of 2002 and connected to the grid at was variously reported as a climb-down on the program the beginning of 2003. In 1997 , Samsø was chosen as because of a change of government in Denmark, or sim- Denmark’s “renewable energy island” after a nationwide ply a deceleration in the light of better-than-anticipated competition involving all Danish islands. The offshore growth in RE. project was part of this development. The project con- sists of 10 wind turbines with a total installed capacity Horns Rev became operational in 2002, and Nysted was of 23 MW. completed at the end of 2003. Following an open tender at the end of June 2005, the Two 160 MW Demonstration Projects government awarded a concession to Energi E2 (now The two projects, Horns Rev 1 and Nysted/Rødsand 1, DONG Energy) for extension of the Horns Rev project were completed in 2002 and 2003, respectively, as the (Horns Rev II). E2 bid the lowest unit energy price for first two projects following the Action Plan for offshore an approximately 12-year period and has contracted Market Development 9 Siemens to deliver 91 of the SWT-2.3-93 VS models for To coincide with the United Nations COP15 Climate installation during 2009. Change Conference in Copenhagen in November and December 2009, DONG Energy and Hvidovre Vindmølle- In January 2006, the government initiated the second laug have applied through the open procedure to replace round of bidding for the 200 MW extension of the exist- the 11 turbines close to the power plant at Avedøre, ing Nysted wind farm, which was also subsequently south of Copenhagen, with three 3–5 MW demonstra- awarded to E2. The project has since been transferred tion wind turbines to be placed 40–100 m offshore from to E.ON Sverige during the restructuring of the Dan- the existing 350 kW turbines. Planning permission has ish energy industry. In December 2007 , however, E.ON not been given as yet with the Environmental Impact decided to relinquish the project because of worsening Assessment (EIA) report due to be issued during the economics—in particular, rising wind turbine prices. With spring 2008. Table 1 summarizes operational and con- the feed-in tariff fixed at the price they had bid, there was sented wind farms in Denmark. no flexibility regarding income. Hence, the Danish gov- ernment announced in February 2008 the initiation of a new competitive tender round to reallocate rights to this Beyond 2010 wind farm. Potential bidders had two months to prepare, The Committee for Future Offshore Wind Turbine Loca- with the deadline for grid connection being delayed a tions published the report, “Future Offshore Wind Tur- year to 2011. E.ON was the successful bidder once more, bine Sites—2025, ” in April 2007 [42]. The report charts a albeit with a higher and viable bid. number of possible areas where offshore turbines could be built to an overall capacity of some 4,600 MW. Tur- Concurrently, the Danish Energy Agency has been updat- bines with such capacity could generate approximately 18 ing its offshore wind action plan, which guides policy TWh, or just over 8 percent of total energy consumption concerning grid integration, shipping, and environmental in Denmark. This corresponds to approximately 50 per- considerations, as well as identification of offshore pro- cent of Danish electricity consumption. The committee tected areas. has examined in detail 23 specific possible locations—44 Table 1: Operational and Consented Offshore Wind Farms in Denmark Site Year Capacity Operator Existing offshore wind farms by 2007 1 Vindeby 1991 5 MW DONG Energy 2 Tunø Knob 1995 5 MW DONG Energy 3 Middelgrunden 2001 40 MW DONG Energy and Middelgrunden Coop 4 Horns Rev 1 2002 160 MW Vattenfall and DONG Energy 5 Rønland 2003 17 MW Private and Cooperative 6 Nysted/Rødsand 1 2003 165 MW DONG Energy and EON Sweden 7 Samsø 2003 23 MW Samsø Kommune and Samsø Vind Coop 8 Frederikshavn 2003 8 MW DONG Energy, MBD, and AU Planned and consented offshore wind farms by 2008–2010 9 Horns Rev 2 2009 200 MW DONG Energy 10 Hvidovre 2009 10 MW DONG Energy and Hvidovre Vind Coop 11 Nysted/Rødsand 2 2010 200 MW New contract awarded to E.ON in 2008 12 Djursland (Anholt) 2012 400MW Tender process initiated Source: Garrad Hassan and Partners Limited compilation. 10 Regulatory Review of Offshore Wind in Five European Countries km2 each—with an overall area of 1,012 km2 divided Taking into consideration the costs involved, the com- among seven offshore areas. mittee recommended that any expansion of offshore wind farm construction should take place in the order Following an agreement in February 2008 between the described next. government and the political opposition on the energy policy for 2008–12 (the 2008 Energy Bill), it was decided The first farms are recommended to be constructed at to build the two next 200 MW farms in accordance with Djursland-Anholt in the Kattegat and Horns Rev in the the plan [52], with the alternative option of a single 400 North Sea. However, the prioritization of Horns Rev MW offshore wind farm. Commissioning should occur depends on the closer evaluation of nature conserva- by 2013. The grid operator has already stated very clearly tion interests. From the economic standpoint, an expan- that its preference is for a single project atDjursland- sion in Jammerbugten off the coast at Ringkøbing in the Anholt [56]. North Sea would be almost identical. Finally, the com- mittee recommends locations at Store Middelgrund in the Kattegat and Kriegers Flak and Rønne Banke in the The Seven Offshore Areas Baltic. The headline results for the recommended sites The committee has assessed society’s interests in rela- are presented in Table 2. The new energy bill [52] and the tion to grid transmission conditions, navigation, the statement from the grid operator suggest that the next natural world, the landscape, raw material exploitation, two farms will be located at Djursland-Anholt [56]. and so forth. The committee also assessed options for As when selecting potential areas, the majority of inter- connecting major offshore wind farms to the national ests were taken into consideration; the recommenda- grid, including examining the engineering, economic, tions for following a particular sequence in constructing and planning options for landing power and the conse- sites are based primarily on the economic consequences quences for the underlying grid of the various potential regarding the additional costs for installation relative to areas for construction. At the same time, the commit- water depths, the landing of power, the expansion of the tee described scenarios for technological development land network, and the expected energy production. of wind turbines capable of installation at greater sea depths. Importance was attached to a planned and coor- The report also discusses a number of areas, several of dinated expansion of wind power and the transmission which have been designated previously in [41], which the network with a view to obtaining the greatest possible committee does not immediately believe to be suited to economic benefits. the installation of large-scale offshore wind farms. Table 2: Headline Results from Future DEA Offshore Recommendations Capital Grid cost Construction investment Overall Installed (millions of cost (millions of (millions of Mean wind investment p.a. Area capacity (MW) DKK/MW) DKK/MW) DKK/MW) speed (m/s) (DKK/kWh) Djursland 2 * 200 3.3 12.7 16.0 9.7 3.98 Horns Rev 5 * 200 4.4 12.8 17.2 10.2 4.01 Jammerbugt 4 * 200 4.9 13.3 18.2 9.8 4.42 Ringkøbing 5 * 200 4.2 15.3 19.5 10.3 4.52 Store Middelgrund 200 3.3 16.1 19.4 9.7 4.80 Kriegers Flak 4 * 200 5.6 14.9 20.5 9.7 5.10 Rønne Banke 2 * 200 4.3 18.1 22.4 9.8 5.50 Note: Mean values cannot be added, since some of the grid costs would be counted twice [42]. Source: Garrad Hassan and Partners Limited. Market Development 11 Cumulative Offshore Capacity actually constructing wind farms at such deep and dis- tant offshore sites means that experience has had to be The plans for establishing further offshore wind farms built up elsewhere first at more accessible locations, and beyond 2012/13 could not be agreed on by the govern- the financial incentives and conditions have had to be ment and political opposition within the scope of the gradually improved, step by step, before investors could 2008 Energy Bill—hence a certain degree of uncertainty develop the confidence to start such major undertakings. remains for the medium term. Following the completion The recent entry of experienced non-German wind farm of Horns Rev 2 and Nysted/Rødsand 2 at the end of 2011, developers into the German offshore market suggests total cumulative offshore wind capacity in Denmark will that that time may have arrived. be 823 MW. Should the two further 200 MW projects, or the equivalent, be sanctioned as expected, the total To date, a number of single-turbine projects have been operational capacity will reach 1,223 MW in 2013. built very close to the shoreline (see Table 3), and several met masts (meteorological masts to take wind measure- ments for wind turbines) have been installed—so far two Germany through a national research program and two by the proj- ect developers. There are also several masts in Danish With more than 20 GW installed, Germany has the larg- waters close to the German border (Table 4). est volume of wind energy–generating capacity in the world, almost twice as much as the two second-placed In addition, the contracts for the first deepwater “test” countries, Spain and the United States, and about 28 per- wind farm, Alpha Ventus at Borkum West, were placed cent of the worldwide total [6]. However, the dedicated in 2008, and offshore construction started in 2009. This areas in the windiest on-land regions in the north of the project is a prototype development and is not typical of country are now approaching saturation. This reflects the the enormous projects that will follow in the future, since perceived capacity of the landscape to absorb new wind it consists of only 12 wind turbines with a total capacity of turbine construction. Hence, attention has been turning 60 MW. It was initiated by a private developer, PROKON to less windy sites in the center and south of the country Nord, which obtained permits for both the wind farm as and to offshore.. well as the transmission cable. However, encouraged by the federal government, responsibility for the first phase Following on from Denmark, Germany was the second has been taken on by a consortium of three German European country to encourage large-scale construction grid operators: EON, Energieversorgung Weser Ems of onshore wind turbines in a similar manner, and it made (EWE), and Vattenfall, known as Stiftung der deutschen its intentions clear very early that offshore wind would Wirtschaft für die Nutzung und Erforschung der Winden- become a major source of power as well. The waters ergie auf See (Offshore-Stiftung) (Institute for the Exploi- immediately adjacent to the German coastline, in par- tation and Study of Offshore Wind Energy). The primary ticular in the North Sea, are considered a valuable natural purpose of Alpha Ventus is to demonstrate the viability habitat, and large parts have been designated as nature of offshore wind farms and test the next generation of 5 reserves. Hence, most of this area is off limits for wind MW wind turbines in an exposed environment. Initially a farm development, and projects have had to be planned number of wind turbine manufacturers were approached, in deeper waters farther off the coast. with eventually the three largest German wind turbine suppliers—Enercon, MultiBrid, and REPower—being Although this announcement did inspire a hasty “land selected to provide four wind turbines each. However, grab” for enough sites to more than double Germany’s Enercon subsequently withdrew, leaving MultiBrid and wind energy–generating capacity, the challenges of REPower to supply six machines each. Table 3: Installed Projects Site Developer Turbines Details Dollart/Emden [79] Enova 1 x 4.5 MW Enercon 10 m from shore in 3 m water Breitling/Rostock [58] Wind-Projekt 1 x 2.5 MW Nordex Within enclosed lagoon; 0.5 km from shore in 2 m water Source: Garrad Hassan and Partners Limited, based on dena and BSH. 12 Regulatory Review of Offshore Wind in Five European Countries Table 4: Meteorological Measurement Masts Site Owner Date Location Mast details North Sea FINO 1 GL Wind Sept. 2003 45 km from coast in Jacket structure; 101 m 30 m waters above surface Amrumbank West Essent Wind and April 2005 35 km from coast in Monopiles; 90 m above Amrum Bank West 23 m waters surface FINO 3 FH Kiel Planned (2007) 45 km from coast Monopiles Horns Rev, DK DONG 1999 3 masts: 2 km northwest, Monopiles: 62 m, 70 m, 2 km east, 6 km east 70 m mast Baltic Sea Sky 2000 Sky 2000 2003 13 km from coast in 21 m Monopile, 22 m above waters surface FINO 2 Schifffahrts-institut May 2007 31 km from coast in 20 m Monopile; 105 m above Warnemünde waters surface Arkona-Becken AWE March 2007 35 km from coast in 24 m Monopile; 95 m above waters surface Nysted (Rødsand), DK DONG 1997 Adjacent to wind farm Monopile; 45 m above surface Gedser, DK — 1997 At Gedser reef; southeast Monopile; 48 m above of Nysted surface — Not available. Source: Garrad Hassan and Partners Limited, based on dena and BSH. The goals for the eventual capacity of offshore wind turbines, with the intention to gain experience with off- energy capacity remain extremely ambitious, although shore wind farms and their impact on the environment shorter-term targets are unlikely to be realized in the and other commercial activities, shipping in particular, timeframe specified. Indeed, a previous target of 500 taking place offshore. The routing of the transmission MW by 2006 has already been missed [83]. However, cable is particularly critical where it has to cross the this lack of early progress has not dampened the political coastal nature reserve area, since construction activities determination to make offshore wind farms happen, and are restricted there. consequently further support mechanisms have been put in place to achieve this goal. One of the reasons for Tables 5–8 list projects under development in the North this determination is that the German wind energy indus- Sea; while Table 9 lists projects in the Baltic Sea. Up- try needs a stable home market in order to thrive, and to-date information on the permitting status of German this can only be offshore in the medium term. Onshore offshore wind farms is available at the BSH [72] and dena repowering is likely to expand over the coming decade, [80] Web sites. but it is unlikely to be sufficient on its own. In addition, an application has been made for H2-20 German offshore wind farms need both a construction (2,000 MW; 200 km; 40 m) in the far northwest of the permit for the wind farm itself, as well as the transmis- German North Sea. sion cable. To date, 17 large wind farms, typically with 80 wind turbines, as well as two smaller projects, have been Predicting dates for construction and future capacities granted permits for construction. The wind farm size is of offshore wind farms is notoriously prone to error, and currently limited to pilot phases with a maximum of 80 the case of Germany is no exception. On the one hand, Market Development 13 Table 5: Offshore Wind Farm Projects in the North Sea—Borkum 1 Group Permits granted No. of Comments Site Developer or investor WTGs Wind farm Cable (distance; depth) Alpha Ventus (Borkum West) Stiftung OWE and DOTI 12 Nov. 2001 Dec. 2004 43 km; 28–30 m Borkum Riffgat Enova and EWE 44 14.5 km; 16–20 m Borkum Riffgrund Plambeck NE and Vattenfall 77 Feb. 2004 34 km; 23–29 m Borkum Riffgrund West Energiekontor 80 Feb. 2004 40 km; 30–35 m Borkum West II Prokon Nord and Trianel 80 Jun. 2008 45 km; 25–35 m North Sea Windpower ENOVA Offshore and Delta (E.ON) 48 Feb. 2005 40 km; 25–33 m Delta Nordsee (Enova 2) ENOVA Offshore and Delta (E.ON) 80 Feb. 2005 40 km Plambeck Neue Energien and Godewind 80 Aug. 2006 45 km; 26–35 m Econcern Godewind II Plambeck Neue Energien 80 45 km; 28–34 m MEG1 Prokon Nord 80 OWP West LCO and Econcern 80 40 km; 29–33 m Nordergründe EnergieKontor 25 Dec. 2003 Sep. 2004 13 km; 2–18 m Note: No date implies that no permit had been issued as of time of writing. Source: Garrad Hassan and Partners Limited, based on dena and BSH. the conditions for the construction permits, feed-in tariff, The Netherlands and grid connection encourage construction within the next few years, but the lack of suitably large turbines, the The Dutch offshore wind opportunity has not been need to wait for transmission lines to be completed, and fully exploited. For more than a decade, a mixture of the effort required to arrange the finances for construc- governmental changes, delays in establishing the con- tion of projects of such an unprecedented size suggest senting process, and a tariff system that was stopped, that further delays are likely. Figure 6 constitutes the started, stopped again, and then revised once more dur- authors’ current best estimate for the future expansion ing 2006/07 has tended to slow development. The first of offshore wind energy in Germany. It assumes that the offshore wind farm in The Netherlands was built as early supply of 5 MW wind turbines will gradually ramp up as 1994, with a second one in 1996. Preparations for the from 2008 and that the ramp rate will be shallower than first major offshore wind farm, at Egmond, were initiated that seen on land in the late 1990s. The difference in in the late 1990s, but development was held back by var- size between on-land and offshore wind turbines means ious policy and process delays, so it has only just com- that the competition for the purchase of offshore wind pleted construction. It appears that the policy situation is turbines will primarily be with the offshore markets in still fluid, which is undoubtedly continuing to affect the other countries. Hence, major construction programs at confidence of potential investors and developers. sites with less challenging conditions or more generous incentives, such as the United Kingdom, may have an Continuing its centuries-long pioneering tradition in the impact on progress. However, the German Renewable development of wind energy technology, The Netherlands Energy Sources Act (EEG) is currently under review, and was the third country in the world to install offshore wind the offshore tariffs are expected to rise again. In the long turbines offshore, at Lely in the sweet-water inland sea Ijs- term, a strong German market will provide turbine manu- selmeer.. However, in a mannersimilar to the experience facturers with the confidence to ramp up manufacturing of modern onshore wind energy in the country, the devel- capacity for the home, as well as other markets. opment of offshore capacity has been slow, intermittent, 14 Regulatory Review of Offshore Wind in Five European Countries Table 6: Offshore Wind Farm Projects in the North Sea—Borkum 2 Group Permits granted No. of Comments Site Developer or investor WTGs Wind farm Cable (distance; depth) Aiolos Eos 80 132 km; 39 m Albatros LCO and Econcern 80 75 km Aquamarin BARD 80 83 km; 38 m Austerngrund GWS and BARD 80 87 km; 40 m BARD Offshore 1 BARD Engineering GmbH 80 Apr. 2007 87 km; 39–41 m Bernstein BARD 80 108 km; 41 m Citrin BARD 80 111 km; 41 m Deutsche Bucht Eolic and BARD 80 87 km; 40 m Diamant BARD 80 11 km; 41 m GAIA (I-V) Northern Energy 80 × 5 90–110 km; 30–41 m Global Tech I Nordsee Windpower 80 May 2006 75 km; 39–41 m He dreiht EnBW 80 Dec. 2007 75 km; 39 m He dreiht II EOS 28 103 km; 39 m Hochsee Windpark Nordsee EnBW 80 July 2006 75 km; 25.7–39 m Notos EOS 33 108 km; 39 m Sea Storm Northern Energy, Westerholt 80 110 km; 41 m Sea Wind I and II Northern Energy, Westerholt 80 × 2 90 km; 39 m Skua OPG Projekt 80 85 km; 38 m Veja Mate BARD (Cuxhaven SC) 80 85 km Ventotec Nord 1 Arcadis (GHF) 80 132 km; 41 m Ventotec Nord 2 Arcadis (GHF) 80 104 km; 41 m Note: No date implies no permit at time of writing. Source: Garrad Hassan and Partners Limited, based on dena and BSH. and plagued with numerous delays. This has not been to shore, at Irene Vorrink in Lelystad. With the safety of through lack of capability—since The Netherlands bene- much of The Netherlands depending on dykes holding fits from highly rated research institutions, as well as suc- back the sea, building regulations for construction on cessful project developers and offshore contractors—but and around these structures are extremely strict, and the rather through lack of consistency of political support. turbines had to be built a few meters offshore. Access to the turbines is via walkways, making operations and Lely wind farm is the world’s first monopile supported maintenance (O&M) straightforward, although construc- offshore wind farm. It lies less than 1 km from the coast, tion was undertaken using floating barges and cranes. near Medemblick. It consists of 4 x 500 kW NedWind wind turbines and has been in operation since 1994. Two In 1998, Grontmij was contracted to assess the potential years after that, a second “offshore” wind farm was for offshore wind power in the Dutch sector of the North built, also in the IJsselmeer, but this time much closer Sea [92]. The resulting GIS model included an inventory Market Development 15 Table 7: Offshore Wind Farm Projects in the North Sea—Helgoland 1 Group Permits granted No. of Comments Site Developer or investor WTGs Wind farm Cable (distance; depth) Amrumbank West Amrumbank West 80 Jul. 2004 Feb. 2007 35 km; 21–25 m Kaskasi Essent 40 35 km Meerwind Ost and Windland and Blackstone 80 May 2007 15 km and 80 km; Meerwind Süd 22–32 m Nordsee Ost WINKRA and Essent 80 Jun. 2004 Feb. 2007 30 km; 19–24 m Hochsee Testfeld Helgoland GEO ca. 35 km; 24 m Note: No date implies no permit at time of writing. Source: Garrad Hassan and Partners Limited, based on dena and BSH. Table 8: Offshore Wind Farm Projects in the North Sea—Sylt/Helgoland 2 Group Permits granted No. of Comments Site Developer or investor WTGs Wind farm Cable (distance; depth) Butendiek OSB Offshore Bürger-Windpark 80 Dec. 2002 35 km; 16–22 m Butendiek and Airtricity Dan Tysk GEO; Vattenfall 80 Aug. 2005 45 km; 23–31 m Nördlicher Grund Nördlicher Grund 80 Dec. 2005 Jun. 2006 86 km; 23–40 m Sandbank 24 Projekt 80 Aug. 2004 Feb. 2007 90 km; 30–40 m Sandbank 24 extension 40 90 km; 25–34 m Uthland GEO 400 MW 49 km; 25 m; Natura 2000 Weiße Bank Energiekontor 280 MW Within Natura 2000 zone 83 km; Natura 2000 Note: No date implies no permit at time of writing. Source: Garrad Hassan and Partners Limited, based on dena and BSH. of current competing uses of the North Sea, such as However, the early promising start for offshore wind shipping, dredging, and oil and gas. Table 10 shows the entered a period of uncertainty when, following the March calculated total area available for wind farm deployment. 2002 elections, the incoming government announced Hence, it was concluded that a national target of 6,000 drastic changes in policy and subsidy support for RE. A MW by 2020 could be built in depths of 20 m or less. new RE support scheme was set up: Environmentally Friendly Electricity Production (Milieukwaliteit Elektric- Existing long-term wind speed measurements taken on iteitsproductie; MEP).4 This provided subsidies to support existing oil and gas exploration platforms in the Dutch the Dutch target of 9 percent of electricity to be sourced sector of the North Sea show that the wind resource is from renewable sources by 2010. However, the conditions excellent [103]. In the Energy Research Centre’s (ECN’s) atlas from 2004, the mean wind speed at 50 m above sea 4. Editor’s note: The MEP scheme was discontinued in 2006, and a level is calculated to range between 9 m/s at nearshore new regulation was introduced in 2007 for a feed-in premium called locations, and 10 m/s close to the Doggersbank [89]. SDE. 16 Regulatory Review of Offshore Wind in Five European Countries Table 9: Baltic Sea Wind Farms Permits granted Comments Site Developer or investor No. of WTGs Wind farm Cable (distance; depth) Arcadis Ost 1 Arcadis and GHF 70 12 nm zone; 17 km; 41–46 m Arcadis Ost 2 Arcadis and GHF — 40 km; 40–45 m Arkona Becken Südost E.ON 80 March 15, 2006 34 km; 23–36 m Baltic I EnBW 21 April 5, 2006 August 23, 2006 12 nm zone;a 15 km; 15–19 m Beltsee Plambeck 125 MW 9 km; 25–36 m GEOFReE GEO 5 12 nm zone; 20 km; 20 m Klützer Winkel Arcadis and GHF 1 12 nm zone; Kriegers Flak EnBW 80 April 6, 2005 31 km; 20–35 m Sky 2000/Beta-Baltic E.ON 175 MW 12 nm zone; 13 km; 21 m Ventotec Ost 2 Arcadis and GHF 80 May 16, 2007 33 km; 36–41 m — Not available. Note: No date implies no permit at time of writing. a. Within territorial waters (12 nautical mile zone). Source: Garrad Hassan and Partners Limited, based on dena and BSH. Figure 6: Wind Energy Installation in Germany—Historic Data and Projections 3,500 35,000 3,000 30,000 Cumulative Installation MW Annual Installation MW 2,500 25,000 2,000 20,000 1,500 15,000 1,000 10,000 500 5,000 0 0 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26 28 30 Year Annual Onshore Annual Onshore (Projected) Annual Offshore (Projected) Cumulative Onshore Cumulative Onshore (Projected) Cumulative Offshore (Projected) Source: Garrad Hassan and Partners Limited and [2], [66], [85], and [86]. Market Development 17 wind turbine. The project has been accompanied by an Table 10: Available Area for Offshore Wind in intensive government-funded technical and environmen- the Dutch Exclusive Economic Zone tal research program, which started before installation and which is due to cover the first five years of operation, Depth < 20 m Depth < 40 m with the resulting reports being freely available over the Distance to coast > 8 km 1,700 km 2 22,000 km2 Internet at references [98] and [104]. EEZ (distance to coast > 20 km) 680 km2 20,000 km2 The second major wind farm at Q7 [102] (the name of the Source: Garrad Hassan and Partners Limited. sector in the North Sea) has also been developed under unusual circumstances, however, without any specific government encouragement. At the time of the original and applicability of the scheme have been changed sev- application in December 1999, the development of the eral times without warning, apparently depending on how current permitting regulations for offshore wind farm had confident the government feels in reaching the target. not started; hence, an exception has been made for this project. The permit application, including EIA, was sub- Hence, unsurprisingly, development has been slow dur- mitted in August 2001, with the licenses for the wind ing this period, and currently only four projects, totaling farm and transmission cable being awarded in February 249 MW, are in operation, Table 11. and March 2002, respectively [96]. Construction was delayed for several years because of uncertainty about None of these four constructed projects has followed whether a sufficient tariff would be applicable, during the current offshore wind regulating regime, with the which time the project was sold by the original developer first two being locating in an inland sweet-water lake, E-Connection (with Vestas, Mammoet van Oord, Smul- the Egmond-NSW project being a special demonstra- ders, and Fabricom initially supporting the development) tion project, and the Q7 project being submitted before to E-Concern (with ENECO joining later on) in October announcement of the new regulation regime and receiv- 2004. Construction started in late 2006, with Vestas sup- ing a special exemption within it. plying 2 MW V80 wind turbines, the use of a relatively small model being necessary because of conditions in The Egmond project [98], also called the Offshore Wind- the license [102]. This is the world’s first offshore wind park Egmond aan Zee (OWEZ) and formally known as the farm to be built with nonrecourse debt facilities [101]. Near Shore Wind Farm (NSW), is the Dutch offshore wind demonstration project and is situated within the Dutch The permitting of offshore structures, such as offshore Territorial Sea (12 nm zone) off Egmond. The project was wind farms, is governed by the Wet beheer rijkswater- originated by the government, which arranged the nec- staatswerken (Wbr), Public Works and Water Manage- essary permits, with approval awarded in March 2004 ment Act [109]. This was extended to the Exclusive [97]. At the same time, the project was put out to ten- Economic Zone (EEZ) in December 2000, and a new off- der, with a consortium of Shell and Nuon being success- shore wind farm licensing system implementing the Wbr ful, with Ballast Nedam to perform the contracting work in the EEZ was initiated on December 29, 2004. This was and NEG-Micon to supply their Dutch-designed DOWEC accompanied by an Integrated Management Plan for the 2.75 MW wind turbine. The subsequent merger of NEG- North Sea, which identified suitable locations, but did not Micon with Vestas resulted in this being replaced with include a full Strategic Environmental Assessment (SEA) the more powerful but slightly smaller 3 MW Vestas V90 [94]. The Directoraat Generaal Rijkswaterstaat (General Table 11: Operational Offshore Wind Farms in The Netherlands Project Wind turbine Capacity Location Year Lely, IJsselmeer 4 x NedWind 40/500 2 MW 800 m to shore in 4–5 m waters 1994 Dronten, IJsselmeer 28 x Nordtank 43/600 18.8 MW 30 m to shore in 1–2 m waters 1996 NSW Egmond, North Sea 36 x Vestas V 90 (3 MW) 108 MW 10 km to shore in 18 m waters 2006 Q7-WP, North Sea 60 x Vestas V 80 (2 MW) 120 MW 23 km to shore in 19–24 m waters 2008 Source: [110]. 18 Regulatory Review of Offshore Wind in Five European Countries Directorate of Waterways and Public Works) of the Min- with an additional capacity between 1 and 1.5 GW (Figure isterie van Verkeer en Waterstaat (Ministry of Transport, 7). The total realizable potential is actually about half of Public Works and Water Management) operates a GIS this, since there is significant overlap among sites.The model of the Dutch EEZ, which is used in the planning scoping documents (richtlijnen or guidelines) for the first decisions and can be accessed via the SenterNovem set of projects were returned after about one year, with Web site [104]. the process speeding up subsequently to six months for the later submissions. Full applications by project devel- Within six months, preliminary applications (startnotie or opers, which include an EIA, have been slower, and to notification of intent) for 57 projects had been submitted date between 2.5 and 3.5 GW have been submitted. that requested permits for a total but overlapping area of Of these, applications for 0.9  GW have been accepted 2,230 km2 and a total generating capacity of between 17 .5 and being evaluated (see Table 12), while 1.3  GW were and 21.5 GW.5 At that point, a temporary moratorium was rejected summarily or rejected following assessment put in place, which lasted about six months. In the subse- (see Table 13). A decision has not yet been made for the quent six months, another eight projects were submitted, other 1.0 GW project on whether to proceed with applica- tion or summarily reject it (see Table 14). An overview of 5. This range represents the minimum and maximum capacities the application process is shown in Figure 8. stated in the application. Figure 7: Overview of Offshore Wind Project Progress in The Netherlands 35 Notification of intent 30 (startnotitle) Total capacity (GW) 25 Scoping document (richtlijnen) 20 Full application (vergunningaavraag) 15 Application accepted 10 (aanvraag) 5 Application rejected (anvraag afgewezen) 0 Error bars indicate 05 r 05 05 05 06 r 06 06 06 07 r 07 07 07 08 r 08 minimum/maximum capacity Jan Jul Oct Jan Jul Oct Jan Jul Oct Jan Ap Ap Ap Ap Source: Garrad Hassan and Partners Limited. Figure 8: Overview of Application Process in The Netherlands Developer Developer Application Permit submits submits accepted and awarded preapplication full application full assessment commences Application assessed Application Application rejected rejected Source: Garrad Hassan and Partners Limited. Market Development 19 Table 12: Accepted Wind Farm Applications Undergoing Assessment Capacity MW Application No. Site Developer Area (km ) 2 Min. Max. Start memo Scoping guide Submit Accept 11 Scheveningen Buiten Evelop 39.4 369 369 Mar. 2005 Mar. 2006 Apr. 2006 May 2007 24 West Rijn Airtricity 45 250 353 Mar. 2005 Mar. 2006 May 2006 Nov. 2006 27 Breeveertien II Airtricity 42 300 403 Apr. 2005 Apr. 2006 Nov. 2006 Nov. 2007 Source: Garrad Hassan and Partners Limited. Table 13: Rejected or Withdrawn Wind Farm Applications Capacity MW Application Area Start Scoping No. Site Developer (km2) Min. Max. memo guide Submit Assess Reject 1 IJmuiden WEOM 17 140 246 Feb. 2005 Mar. 2006 Jun. 2006 Nov. 2006 Feb. 2008c (Nuon and Shell) 4 Katwijk WEOM 50 400 705 Feb 2005 Mar 2006 May 2006 Nov. 2006 Feb. 2008 (Nuon and Shell) 5 Den Haag I WEOM 25 215 381 Feb 2005 Mar 2006 Jun. 2006 Jul. 2006a (Nuon and Shell) 6 Den Haag II WEOM 43 270 480 Feb 2005 Mar 2006 May 2006 Jan. 2007 Feb. 2008c (Nuon and Shell) 25 Q4-WP E-Connection 21 100 100 n.a. n.a. Feb. 2005 n.a. Nov. 2006b 26 P12-WP E-Connection 21 100 100 n.a. n.a. Feb. 2005 n.a. Nov. 2006b n.a.= Not applicable. a. Expected relocation of shipping lanes. b. Insufficient information supplied by the developer to enable the evaluation to be carried out. c. Application repealed. Note: These applications are undergoing assessment. Source: Garrad Hassan and Partners Limited. Table 14: Wind Farm Applications Currently under Review Capacity MW No. Site Developer Area (km2) Min. Max. Start memo Scoping guide Application 10 Katwijk Buiten Evelop 40.6 329 329 Mar. 2005 Mar. 2006 May 2006 16 Helmveld Evelop 50 432 432 Mar. 2005 Mar. 2006 Sep. 2007 28 Rijnveld Noord E-Connection 10 60 60 Apr. 2005 Apr. 2006 Sep. 2007 29 Rijnveld Oost E-Connection 17 102 102 Apr. 2005 Apr. 2006 Sep. 2007 55 Okeanos Arcadis 13 40 120 May 2005 May 2006 Sep. 2007 57 Thetys Arcadis 16 50 159 May 2005 May 2006 Aug. 2006 Source: Garrad Hassan and Partners Limited. 20 Regulatory Review of Offshore Wind in Five European Countries Information on the status of the projects, together with mean that the area will pass the final environmental the preliminary applications (startnotie), scoping guide- evaluation. lines (richtlijnen), and final permits (that is, for NSW [97] 2. Exclusion areas: Significant environmental impact and and Q7 [96]), is available at the SenterNovem [105] and conflicts with other sea uses have been detected. NoordZee Loket [99] Web sites. These areas should be discarded when scouting for potential offshore wind farm sites. The large sweet-water IJsselmeer also provides oppor- 3. Environmental determinants areas: Areas where envi- tunities for offshore wind farms, so the district of Noord- ronmental impact or conflicts must be analyzed later Oostpolder decided in 1999 that all wind parks should be in the design stage of the project. in the IJsselmeer rather than on land [100]. This inland sea falls outside the scope of the current on- and off- According to government estimates, 42 percent of Span- shore wind legislation, and prolonged discussions were ish coastal seas are suitable for offshore installations. On needed before the decision that the Economic Ministry the other hand, a number of the most technically prom- would lead the permitting procedures could be reached ising areas, such as the Strait of Gibraltar and the Ebro in 2006 [107]. River Delta, have been classified as exclusion areas. There is very limited opportunity for developing bottom- Spain mounted offshore wind farms off the Spanish coast, with a single large site at Cabo de Trafalgar, west of the Strait To date no offshore wind farms have been built in Spain of Gibraltar, potentially being able to support ~1,000 MW despite some of the major Spanish developers, such as of capacity. The other sites are small, very close to the Gamesa and Accíona (formerly EHN), having shown inter- shore, or both. est in offshore developments. In 1997 , a large project called Mar de Trafalgar developed by EHN of about 1,000 Should a floating wind solution become feasible and eco- MW (270 wind turbines) was rejected because of the nomically viable, the long-term potential for developing pressure exerted by fishermen and political, social, and offshore wind farms in 200 m waters is excellent off the ecological groups. Following this early failure, less ambi- Iberian Peninsula. tious projects have been rejected for similar reasons. In 2007 , 3.5 GW of onshore wind farms were installed Before July 2007 there was no specific legislation for in Spain—23 percent of the total installed capacity. This offshore wind installations. Royal Decree 1028/2007 rapid capacity increase in 2007 is in part a result of the [117] is the first step for developing a comprehensive change of tariff established in Real Decreto 661/2007 regulatory framework for offshore wind in Spain. In addi- [99], which applies to all wind farms commissioned after tion, in December 2007 the government published the 2008. Current projections are to continue growing at a “Estudio estratégico ambiental del litoral español para la rate of 1,700 MW each year to reach current targets for instalación de parques eólicos marinos” [111], a Strate- 2010. Nonetheless, offshore wind energy is becoming a gic Environmental Assessment (SEA) in which the ter- real option for developers. ritorial sea is classified into regions taking account of the suitability of installing offshore wind farms with respect Although Spanish manufacturers have been able to export to significant environmental impacts and the existence significant volumes of wind turbines, as in Germany, a of conflict with other users of the marine environment, stable and significant national market is a prerequisite for such as the shipping industry. The aim of this study was a successful indigenous manufacturing industry. Hence, to guide developers at an early stage of project devel- there has been sustained pressure to establish an off- opment when there was more room to maneuver. This shore wind market that will be ready when saturation of should help to accelerate administrative procedures later the onshore market is reached. in the life of the project. It is too early to learn lessons from the Spanish off- The classification consists of three categories: shore wind experience. However, it is clear that they have attempted to learn from the experiences of other 1. Suitable areas: No environmental impact has been countries. detected as of the date of the study. This does not Market Development 21 The United Kingdom Table 15: Details of Current and Consented UK Projects Blyth The first offshore wind project to be constructed in the Site Round Capacity United Kingdom was at Blyth Offshore in the North Sea, 1 km off the coast of Northumberland. The project Operational offshore wind farms (2008) consists of two Vestas V66 wind turbines, each with a 1 Blyth Other 4 MW rated capacity of 2 MW, and was completed in Decem- ber 2000. At the time, these were the largest offshore 2 North Hoyle 1 60 MW wind turbines in operation—an honor soon shared with 3 Scroby Sands 1 60 MW the Middelgrunden Project in Denmark, which was also completed in December 2000. 4 Kentish Flats 1 90 MW 5 Barrow 1 90 MW Blyth was primarily an R&D project, with significant capital support from the European Union through the European 6 Beatrice Other 10 MW Commission’s Thermie Programme. It was developed by 7 Burbo Bank 1 90 MW a consortium comprising AMEC Border Wind, Powergen Renewables, Nuon UK, and Shell Renewables. The UK Offshore wind farms under construction (2008) government has some involvement with the project, 8 Robin Rigg, Solway Firth 1 180 MW funding a monitoring and evaluation program through the Department of Trade and Industry (DTI) [132] that 9 Lynn and Inner Dowsing 1 194.4 MW included themes such as health and safety, installation, 10 Rhyl Flats 1 90 MW commissioning, navigation aids, capital, and operational costs. Above and beyond the R&D value and technical Consented offshore wind farms with principal contracts in place innovation emerging from the project, its outcomes were to inform policy toward offshore wind development in 11 Gunfleet Sands 1 100 MW the United Kingdom. 12 Greater Gabbard 2 500 MW Details on all currently operating wind farms in the United Consented offshore wind farms Kingdom can be found in Table 15. 13 Scarweather Sands 1 90 MW 14 Teesside 1 90 MW Round 1 15 Ormonde Other 150 MW The body that holds ownership of the seabed in the United Kingdom, the Crown Estate, launched the first 16 London Array 2 1 GW “round” of offshore wind development in the United 17 Thanet 2 300 MW Kingdom in late 2000. Companies were invited to put forward bids for development rights for sites of up to 30 18 Sheringham Shoal 2 315 MW km2 containing no more than 30 wind turbines, all within Source: Garrad Hassan and Partners Limited. UK territorial waters (<12 nautical miles from the national coastal baseline). Following an evaluation process, all 18 projects were awarded leases for development in April 2001, which constituted a potential installed capacity of the United Kingdom, planning approval rates have been up to ~1.5 GW. It should be noted that some of the proj- very high and reasonably fast. However, realization ects were colocated in order to form “double” projects, of projects has been slower than the government had and in one case a “triple” project was awarded. hoped. There have been a number of reasons for project delays, but weak economics because of high costs has Round 1 was conceived as an initial proving ground for been primarily to blame The critical factors were corpo- offshore wind in the United Kingdom, and wind farms rate reluctance over project costs and unwillingness on were limited in size and sited mostly in shallow, near- the part of contractors to take turnkey risk. However, shore waters. Compared to the onshore experience in some developers have begun to accelerate projects into construction. 22 Regulatory Review of Offshore Wind in Five European Countries The first Round 1 project to be completed was North At the time of writing, the most advanced of the Round 2 Hoyle (60 MW), which came into operation in 2004 and projects were in receipt of statutory consents, but none was followed by Scroby Sands (60 MW) that same year. had started construction. About half had yet to submit Both of these projects were developed by large utilities consent documents.7 that used the project to gain early experience in offshore wind. There followed the construction of Kentish Flats Although projects are progressing, there is considerable (90 MW) and Barrow (90 MW), completed in 2005 and uncertainty over their financial viability, and the allocation 2006, respectively. The Burbo Bank project (90 MW) in of responsibility for timely delivery of a cost-effective the Irish Sea completed commissioning in the autumn grid connection is a pressing matter for most projects. of 2007 . At earlier stages of construction were Lynn The government has not announced any additional capi- and Inner Dowsing (194 MW), Robin Rigg (180 MW), tal support for Round 2 projects. However, the additional and Rhyl Flats (90 MW).6 Gunfleet Sands (108 MW) was support offered to offshore wind through Renewables scheduled for construction starting in 2008, with comple- Obligation Certificate (ROC) banding, as discussed in the tion planned for 2009. section on the United Kingdom in Chapter 3, is likely to stimulate the acceleration of development and construc- In total, this will lead to a total installed capacity of 962 tion activity within Round 2. MW for Round 1 before 2010, which constitutes approxi- mately two-thirds completion of the original Crown Construction on at least one of the Thames Estuary Estate lease sanction some nine years after issue. This Round 2 projects is likely to start before 2010. slow delivery has resulted in a poor message being sent to the government. Non–Round 1 and 2 Projects Although the vast majority of offshore wind development Round 2 within the United Kingdom has centered on the two suc- The UK Department of Trade and Industry (DTI) produced cessive Crown Estate rounds, there are some notable a framework document in 2002 entitled “Future Off- exceptions. In addition to the Blyth offshore project, four shore” [133], in which plans were set out for the devel- other offshore projects have been developed outside of opment of offshore wind beyond Round 1. Following the rounds. stakeholder consultation on this document, SEAs were commissioned by the government for three regions iden- • Ormonde Offshore Wind Farm tified as promising for development to address broad Eclipse Energy has submitted a proposal for a environmental issues: the Thames Estuary, the Greater ~100 MW wind farm in conjunction with extraction Wash, and the North West. Following completion of of marginal gas reserves. Consent for the wind farm the first phase of the SEAs, the Crown Estate issued a portion of the project was granted in February 2007 . request for expressions of interest for the second round • Tunes Plateau Offshore Wind Farm of offshore wind development in the United Kingdom in A consortium has developed an offshore wind farm February 2003, which was followed by a formal Initiation within the waters of Northern Ireland for an up to 180 to Tender in July 2003 [121] to those companies that reg- MW scheme. Following vociferous local opposition istered an interest. to the scheme, one of the project partners, E.ON, pulled out of the project. Since then, it is understood Round 2 was designed to be much more ambitious than that the scheme has been shelved. its predecessor, with no limit on size and with some pro- • Beatrice Offshore Wind Farm posals outside of territorial waters. Of the 70 proposed The Beatrice Offshore Project is currently in the late projects, a total of 15 were granted leases for develop- stages of construction and consists of two 5 MW ment. Unlike Round 1, the successful companies were wind turbines installed in approximately 45 m of dominated by large utilities and international oil and gas water off the east coast of Scotland. The Beatrice firms. project has received a significant amount of research funding from the European Union, the UK govern- ment, and the Scottish Executive. 6. Editor’s note: Lynn and Inner Dowsing were completed in July 2008, with full generation achieved in March 2009. Construction of 7. Update: DONG Energy announced in April 2009 that the Round Robin Rigg has been completed, but commissioning of its turbines 2 turbine was installed at the Gunfleet Sands Offshore Wind Farm is still ongoing. Rhyl Flats started partial generation in July 2009. project in the Thames estuary off the east coast of England. Market Development 23 • Aberdeen Offshore Wind Farm is likely to be announced in 2008, with leases granted in An offshore wind project of up to 115 MW is cur- 2009/10 [122]. rently under development in Scotland near Aberdeen by a partnership between the Aberdeen Renewable More information on current and future concessionary Energy Group (AREG) and Amec Wind. issues in the United Kingdom is provided in the section on the United Kingdom in Chapter 3. Although the Ormonde and Tunes Plateau projects were not granted lease rights under the Crown Estate rounds, they are considered by the DTI to be Round  1 projects Comparative Summary and are therefore eligible for Capital Grant support. Table 16 provides a brief comparative summary of mar- ket development for offshore wind for the five countries Round 3 considered. In December 2007 , the Secretary of State for Busi- ness, Enterprise and Regulatory Reform, John Hutton, Concerning project characteristics, Figure 9 illustrates proj- announced a significant expansion for offshore wind, ect water depth and distance to shore for projects in the declaring a target total capacity of 33 GW by 2020. In key European markets. No distinction is made between order to begin to address this ambitious target, the Depart- operating and planned wind farms, but it is clear that Ger- ment for Business, Enterprise and Regulatory Reform man and Dutch projects are located significantly farther (DBERR) indicated that a further round of development from the coast than those in the other principal countries. Figure 9: Project Depth and Distance to Shore 50 Belgium 45 Germany 40 Denmark 35 Spain Maximum depth 30 France 25 Ireland 20 Netherlands 15 Sweden 10 United Kingdom 5 0 0 20 40 60 80 100 120 140 Distance to shore Source: Garrad Hassan and Partners Limited. 24 Regulatory Review of Offshore Wind in Five European Countries Table 16: Comparative Summary—Market Development Historical Future Country Market development summary pedigree prospects Denmark Denmark has led the development of offshore wind technology, with early Good Good R&D deployments throughout the 1990s. Construction of the large demonstra- tion projects at Horns Rev and Nysted cemented Denmark’s position at the leading edge of the industry. Despite cancellation of offshore projects in the early part of this decade because of political upheaval, the recent announce- ment of a string of future sites based on long-term strategic spatial planning has reinvigorated offshore wind activity in Denmark. Germany Germany has just two offshore wind turbines installed at present, although Poor Good the potential for massive future deployment is high, with a national aspiration of 25 GW installed by 2030. Currently, 1.8 GW of offshore wind projects are in receipt of all necessary consents to build with a further 4.8 GW awaiting a cable permit. Netherlands The Netherlands played a significant early role in offshore wind with two Moderate Moderate deployments during the 1990s. This was followed by two demonstration projects (one of which is under construction). A large volume of applications for future projects has been made, although to date their success rate has been poor. The regulatory regime and level of political support are at present considered insufficient to achieve the national target of 6 GW by 2020. Spain Spain has played a major role in the development of onshore wind energy, Poor Good being the third European country (after Denmark and Germany) to develop (long term) significant levels of generating capacity. The presence of several major wind farm developers and wind turbine manufacturers means that, once onshore sites have been developed, there will be a strong impetus to develop offshore projects. With the announcement by the Spanish government of regulatory and tariff regimes for offshore wind, the first steps have been made. However, the prognosis can only be good in the long term, since no Spanish manufac- turer has developed an offshore wind turbine. The permitting regime expects the first projects to be built around 2014, and the long-term expansion will require deepwater technology to be developed and proven. United The first deployment of offshore wind in the United Kingdom occurred in Good Good Kingdom 2000, which was followed by the announcement of a first demonstration round of offshore projects comprising ~1.6 GW (18 projects). Of these, four are in operation, with a further six under construction. A second round of schemes was announced in 2003, resulting in 15 site awards comprising ~7.2 GW. The first Round 2 project is likely to be in operation by 2010. A third concessionary round was announced in June 2008. Note: A poor historical rating in Germany and Spain represents the lack of offshore deployment to date. Of course, the historical success of onshore wind in Germany should be considered when looking forward to offshore deployment. Source: Garrad Hassan and Partners Limited. 3 Targets and Incentives This chapter explores the overall national RE deployment The European Union targets for each of the national markets of interest. The international commitments and national policy initiatives The prospects for offshore wind energy within the Euro- driving these targets are also discussed. Specific targets pean Union are dependent on how the strategic objec- for offshore wind technology are discussed, as is the tives of reducing dependence on imported energy and likelihood of achieving these in each case. reducing greenhouse gas (GHG) emissions are imple- mented at a national level. Hence, success will depend National incentive schemes for RE production are dis- on the specifics of the directives, in particular the level of cussed, as well as any specific provision of wind energy target assigned to each country, the strength of the legis- and/or offshore wind energy. Any firm future plans for lation, the response at a national level, and the availability the revision or replacement of these schemes are also of different types of RE in each country. outlined for each country. Figure 10: Greenhouse Gas Emission Reduction Targets across Europe 60 40 GHG emissions (CO2 equiv) 20 (percent) 0 -20 -40 2004 Target -60 -80 . m ece nce Lith ia ia Slo land ia in ds ark the rg den a lta Slo . ny and Lux Italy m Rep a al Cze rus ry d -15 Rep oni giu stri v uan ven lan Spa gdo bou tug nga rlan rma Lat Ma nm Gre Fra Cyp EU we Irel Po Est Bel ch Au Fin vak Por Kin em Hu De Ge S Ne ited Un Note: Target refers to average emissions during 2008–12 compared with the respective base year. Values exclude a Kyoto Mechanism adjustment. Source: Garrad Hassan and Partners Limited. 25 26 Regulatory Review of Offshore Wind in Five European Countries Table 17: Greenhouse Gas Emission Table 18: Greenhouse Gas Emission Reduction Reduction Targets across Europe Targets across Europe (Additional (Original Agreement; EU 15 Countries) Agreement; Select EU 10 Countries and Malta and Cyprus) Country 2008–12 target (%) 2004 actual (%) Country 2008–12 target (%) 2004 actual (%) Belgium -7.5 0.7 Cyprus No target 48.3 Denmark -21.0 -1.7 Czech Republic 92.0 -25.1 Germany -21.0 -17.5 Estonia 92.0 -50.0 Greece 25.0 23.9 Hungary 94.0 -32.0 Spain 15.0 47.9 Latvia 92.0 -58.7 France 0.0 -0.8 Lithuania 92.0 -60.1 Ireland 13.0 22.8 Malta No target 45.5 Italy -6.5 12.1 Poland 94.0 -31.6 Luxembourg -28.0 0.0 Slovak Republic 92.0 -30.3 Netherlands -6.0 1.6 Slovenia 92.0 -0.5 Austria -13.0 15.7 Note: Target refers to average emissions during 2008–12 compared Portugal 27.0 40.8 with the respective base year. Values exclude a Kyoto Mechanism adjustment. Finland 0.0 14.5 EU 10 refers to the 10 former communist countries in Central and Eastern Europe. These are Bulgaria, the Czech Republic, Estonia, Sweden 4.0 -3.6 Hungary, Latvia, Lithuania, Poland, Romania, the Slovak Republic, and Slovenia. United Kingdom -12.5 -14.1 Source: [23]. European Community -8.0 -0.9 Note: Target refers to average emissions during 2008–12 compared with the 1990 base year. Values exclude the Kyoto Mechanism • Targets were set through negotiation among the adjustment. member countries, and the levels depended on the Source: [23]. particular circumstances in each country, including relative wealth, absolute levels of emissions, ease of achieving reductions, and strength of the desire Two principal directives are of relevance to RE, including within the country to reduce emissions. offshore wind: • In 2004, Germany, Greece, and the United Kingdom were the only countries that appeared to have a real- 1. That requiring reductions in GHG emissions [36] istic chance of meeting their respective targets. 2. That requiring increase in use of RE as a percentage • Countries with relatively high per capita emissions of total energy used [35] draft of revised directive include Belgium, Finland, Ireland, Luxembourg, and [29]. The Netherlands, which reflects, among other fac- tors, level and type of industrialization, source of electricity generation, and general wealth. Greenhouse Gas Emissions • Countries with relatively low per capita emissions Tables 17 and 18 and Figure 10 illustrate the currently include France, Italy, Portugal, Spain, and Sweden. applicable target reductions in GHG emissions for each of the original countries in the burden-sharing agree- With the period 2008–12 covered by the Kyoto Agree- ments, together with the progress achieved at the end ment approaching its end, attention is now turning to the of 2004. It is worth noting the following: post–Kyoto Agreement. The European Union is proposing a new, more ambitious target of a 20 percent reduction (once more with respect to the 1990 base level) in GHGs continent-wide by 2020 [30]. Targets and Incentives 27 Renewable Energy the other end include Belgium, Ireland, The Nether- lands, and the United Kingdom. As can be seen, the recently published draft targets for • The growth targets vary significantly as well. Among RE are both challenging and impressive (Table 19 and the most challenging are the following: Figure 11). The countries assessed within this study are u The United Kingdom is expected to increase the highlighted in bold text. The following should be noted penetration by 13.7 percentage points, a factor about these targets: of 11.5 over the current level. u Denmark is targeted to increase its use of RE by • They refer to total energy and not just electricity 13 percentage points, from eighth to sixth in the usage. ranking—hence a relatively substantial effort. • They are measured in terms of “Final Consumption u Spain currently sources relatively little of its ” of Energy. energy from renewables in spite of its leading • The targeted rise in use of renewable energies is position in both wind and solar energies. The unprecedented. low penetration reflects the difficulty of devel- oping bioenergies in hot, dry climates, although Examining the national targets in greater detail, the fol- the target specifies an increase of 11.3 percent- lowing can be seen: age points, which will more than double the presence of renewables. • Tremendous variation exists between the use of u In spite of Germany’s prominence in most renewables in different countries. In general, some RE technologies, in fact it sources currently Baltic and Eastern European countries have higher less than 6 percent of energy from renewable penetrations. The countries lying in the extremes at sources, which should increase by a factor of 3. Table 19: Draft Targets for National Renewable Energy in Europe RE share of total energy (%) RE share of total energy (%) Country 2005 2020 Country 2005 2020 Belgium 2.2 13 Luxembourg 0.9 11 Bulgaria 9.4 16 Hungary 4.3 13 Czech Republic 6.1 13 Malta 0.0 10 Denmark 17.0 30 Netherlands 2.4 14 Germany 5.8 18 Austria 23.3 34 Estonia 18.0 25 Poland 7.2 15 Ireland 3.1 16 Portugal 20.5 31 Greece 6.9 18 Romania 17.8 24 Spain 8.7 20 Slovenia 16.0 25 France 10.3 23 Slovak Republic 6.7 14 Italy 5.2 17 Finland 28.5 38 Cyprus 2.9 13 Sweden 39.8 49 Latvia 34.9 42 United Kingdom 1.3 15 Lithuania 15.0 23 Note: At the time of writing, the national RE targets were in draft form. Directive 2009/28/EC was officially agreed on in April 2009 and was pub- lished on June 5, 2009, in the official journal. The list of individual country targets is available in Annex 1 of the Directive, which can be downloaded at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:140:0016:0062:EN:PDF . Source: [29]. 28 Regulatory Review of Offshore Wind in Five European Countries Figure 11: National Renewable Energy Targets across Europe 60 Target share (for 2020) 50 Current share (2005) 40 percent 30 20 10 0 ark em ia lta ny a rus Lith ia ry and and nce y Hu g a Rom al Slo a vak a . d ited eden m m a . ece in ds Rep Rep Ital oni r stri ani i lan i gdo giu v uan nga tug ven gar Spa bou rma rlan Ma Lat nm Cyp Gre Fra Pol Irel Est Fin Au Sw Bel Por Bul ch Kin De Ge the Cze Slo Lux Ne Un Note: This compilation was a draft at the time of writing. Source: [29]. u The Netherlands is in a similar position to the Since the first oil crisis in 1973, energy policy has occu- United Kingdom with low current usage of RE, pied a relatively significant position in the political debate including wind. It also has an impressive target in Denmark. The DEA was established in 1976, primarily of increasing usage, by a factor of almost 6 or as a reaction to the problem of security of supply, but 11.6 percentage points. gradually the focus also was brought to bear on domes- u Also of interest to offshore wind are Belgium, tic energy production (for example, North Sea oil and Finland, France, Ireland, and Sweden. gas and RE), on energy supply and distribution (such u Of lesser interest because of its small size, but as the natural gas grid, and combined heat and power, worth noting, is Malta. It currently has no RE or CHP), and on energy savings (such as insulation and at all and limited space for onshore RE, but is labeling schemes). In addition, international sustainability targeted to reach 10 percent. targets—not least the reduction of CO2 emissions—and economic considerations have had a significant role to play in recent years, during which the DEA has admin- Denmark istered, for example, subsidies for energy savings and green energy taxes, liberalization of the electricity and Energy Policy gas markets, and introduction of CO2 quotas. It is the responsibility of the DEA to lay down guide- lines for the best possible production and distribution of Renewable Energy Policy before 2001 energy, while considering such issues as security of sup- The main objective is to phase out the use of coal by ply, cost efficiency, and international commitments. By 2030 [43]. RE and gas were the main instruments cho- means of feasibility studies, cross-cutting analyses are sen to achieve this goal. Offshore wind was expected to performed in order to establish the way in which a given grow to150 MW (projections were based on 1997 figures objective can be fulfilled in the most flexible and cost- not imagining the fast growth in turbine size). In 2001 efficient manner. there was a change in government, and offshore wind was put on hold until 2006. Targets and Incentives 29 Renewable Energy Policy after 2001 • Increasing the transparency and predictability of subsidy levels An energy policy report is submitted each year to the • Promoting biogas use: The government wishes to Danish Parliament; the latest is from 2007 [45]. Based promote the use of biogas, which could contribute on this, the following observations are made in relation to reducing the consumption of fossil fuels and to RE in Denmark. emissions of the GHG, methane, and solve a waste disposal problem for the farming industry. The promotion of renewable sources of energy is a cru- • Promoting wind energy through strategic planning: cial aspect of the government’s future vision of fossil The government will seek to establish a good frame- fuel–free energy supplies. Today, the primary sources of work for Danish wind capacity, including through the RE are wind and biomass. A great deal of electricity and promotion of onshore and offshore demonstration heating is also produced from waste, which is a valuable and trial sites and the drawing up of an infrastructure resource that would otherwise be lost. plan for offshore wind turbines. • Improving the exploitation of energy from waste: Wind power technology plays a crucial role in current RE The government will work to promote the use of the supplies, and is undergoing constant development. Thus, increasing amounts of waste in central power sta- there are many indications that wind power will continue tions for the highly efficient combined generation of to make a very important contribution to Danish energy power and heating. supplies, and allowances must be made for this when • Rationalizing the levy system to promote the cost- drawing up plans for the future energy infrastructure. effective use of RE: The government wishes to As a result, the government appointed two committees promote the cost-effective reduction of CO2 emis- earlier—one to examine the future location of offshore sions by ensuring that the incentives for reducing wind turbines [42] and the other to plan future onshore the burning of fossil fuels are in principle uniform wind turbines. within and outside of the quota subject sectors. The government will draw up specific proposals. In recent years, the government has implemented a • Promoting the use of more heat pumps for house- number of specific initiatives to reform subsidy schemes holds: The government wishes to initiate a campaign and promote the increased application of market mecha- aimed at promoting the use of energy-efficient nisms in the RE area, under which public subsidies for RE heat pumps as replacements for worn-out, oil-fired will be applied considerably more efficiently in the future boilers. than is the case today. • Increasing flexibility in the choice of fuels: The gov- ernment will continue to promote liberalization of the The government is seeking to set up a flexible and effi- current rules for the use of fuels for the generation cient model for ensuring conversion to RE while at the of electricity and heating, so as to increase gradually same time ensuring that such conversion is underpinned the use of biofuels in combined power and heating by efficient and competitive energy markets. generation in a manner that is justifiable from the socioeconomic and energy standpoints. In its proposed “Visionary Danish Energy Policy 2025” • Increasing the use of biofuels for transport: The pro- [46], the Danish government proposes the following portion of biofuels used in transport will increase to measures: reforming and enhancing the efficiency of the 10 percent by 2020. The government is ready to set subsidy system for promoting the use of RE. The pres- up partial targets earlier than 2020, provided that ent RE subsidy scheme (Public Service Obligation; PSO) technologies that are adequately socioeconomically must be reformed to reduce the unit cost of RE below competitive and environmentally sustainable have today’s level. been developed. • Providing tax exemption for hydrogen-powered cars: The government’s long-term vision involves the following With a view to promoting the conversion of energy main components: consumption in the transport sector from fossil fuels to alternative fuels, the government will exempt cars • Promoting the most possible RE for the available powered by hydrogen from tax. (monetary) resources • Increasing the use of tenders and encouraging as These initiatives will be assessed and supplemented or much competition as possible replaced by additional initiatives following the regular reappraisal of the energy strategy every four years. 30 Regulatory Review of Offshore Wind in Five European Countries The agreement of February 2008 covering the period Denmark plans to meet part of the Kyoto Protocol com- 2008–12 focuses on the following [52]: mitments through Joint Implementation (JI) and Clean Development Mechanism (CDM) projects, specifically in • Increase of wind energy capacity, partly onshore but Eastern Europe [53]. However, financial support to wind mostly offshore, encouraged with bigger incentives farms has been provided elsewhere, including China [55] • Increase of biomass usage by bigger incentives and Egypt [54]. • Increase of heat pump usage • Special support for development of solar photovolta- ics (PV) and wave energy Incentives for Wind Turbines • Reduction in total energy consumption by provision Subsidies for wind turbines depend on the date that of incentives to encourage energy saving. each machine is connected to the grid and the age of the machine. International Commitments Turbines bought before the end of 1999 are eligible for a Denmark is a signatory to and has ratified the Kyoto Pro- subsidy that, together with the market electricity price, tocol. In addition, the Danish government signed up to ensures a tariff of DKK 0.60 per kWh until the full load the EU Energy Policy for Europe at the spring summit hour allowance is used up, and thereafter DKK 0.43 per on March 8–9, 2007 , which committed the 27 member kWh until the turbine is 10 years old. A premium of DKK states to a reduction of CO2 emissions of 20 percent by 0.10 per kWh until the turbine is 20 years old is subse- 2020 (referenced to 1990 levels). quently eligible. The premium is regulated in accordance with the market price, since the total of the two must not In addition, the Danish government helped to formulate exceed DKK 0.36 per kWh. and is a key supporter of the Copenhagen Strategy on Offshore Wind [47], which sets out a blueprint for the Turbines connected to the grid in the period 2000–02 development of a European Union–wide framework for are eligible for a subsidy that, together with the market the successful deployment of offshore wind technology. electricity price, ensures a tariff of DKK 0.43 per kWh for 22,000 full-load hours. A premium of DKK 0.10 per kWh One of the main provisions of the EU policy plan is the until the turbine is 20 years old is subsequently eligible. target of 20 percent of all energy consumption to be sup- The premium is regulated in accordance with the market plied from renewable sources by 2020. Denmark currently price, since the total of the two must not exceed DKK has set a national contribution of 30 percent by 2025. 0.36 per kWh. However, the new draft EU Energy Policy for Europe of January 2008 sets a target for Denmark of sourcing 30 Turbines connected to the grid in the period 2003–04 are percent of all energy from renewable sources by 2020 eligible for a premium of DKK 0.10 per kWh until the tur- (Figure 12). bine is 20 years old. The premium is regulated in accor- dance with the market price, since the total of the two must not exceed DKK 0.36 per kWh. Figure 12: Development in Renewable Energy Use in Denmark as Percentage oF Turbines connected to the grid from January 1, 2005, Total Energy Consumption to February 20, 2008, are eligible for a premium of DKK 0.10 per kWh until the turbine is 20 years old, as well as an allowance of DKK 0.023 per kWh for balancing power 35 costs. Projected to meet EU targets 30 Turbines connected to the grid from the February 21, 25 Projected (energy bill) 2008, are eligible for a premium of DKK 0.25 per kWh percent 20 22,000 full-load hours and after this period DKK 0.10 per 15 Actual kWh until the turbine is 20 years old, as well as an allow- 10 ance of DKK 0.023 per kWh for balancing power costs. 5 0 It should be noted that additional installed capacity in 1980 1985 1990 1995 2000 2005 2010 2015 2020 Denmark onshore has been very limited since 2002, because the tariff provided insufficient income. There Source: [52]. has been a limited level of activity concerning repowering Targets and Incentives 31 (replacement of the oldest wind turbines with new mod- Where the wind farm is not following the site selection els) because that tariff is marginally more attractive. and timing specified in the government Action Plan [42], that is, the project is being submitted under the “Open Offshore wind farms financed by electricity utilities or Door Principle,” the grid connection must be paid by the subject to tender are subsidized according to separate project developer, and the tariff will be set at the same rules following the principle mentioned below: level as for onshore wind farms. • Plant owners are responsible for the sale of produc- tion on the electricity market and for related costs. Expectation for Revision of Incentives • Owners are eligible for a subsidy that combined The ongoing negotiation at the government level about with the market price comprises DKK 0.453 per the future incentives for wind is not expected to change kWh. The subsidy is payable for 42,000 full load– the incentives for offshore wind. That is, the price will equivalent hours.8 If production is subject to a grid be negotiated through competitive tender based on the tariff, it is eligible for additional compensation of up model described above. to DKK 0.007 per kWh. • Once the specified full load–equivalent hours have For onshore turbines, a compensation of DKK 0.20 per been generated (typically 10 years), a premium of kWh on top of the market price for electricity is expected up to 0.10 DKK per kWh can be paid until the turbine for the first 25,000 full-load hours [50]. is 20 years old. The premium is regulated in accor- dance with the market price, in that the total tariff must not exceed DKK 0.36 per kWh. Germany • Grid connection is provided by the grid utility at no cost to the project (see the section, Grid Access, in Germany has one of the most ambitious RE targets in Chapter 4). Europe, underpinned by broad and steady support within the population to increase the use of RE. This is driven The number of full-load hours and the price for these are by a cocktail of factors, some emotional, ranging from an subject to negotiation or competitive tender for each off- antinuclear sentiment and concerns over global warm- shore wind farm. ing to concerns for security, reliability, and availability of energy supplies. The success of German industry in the • For the first two projects (Horns Rev and Nysted), field of environmental technology and the consequent the tariff was set at the designated offshore rate of economic benefits that can be reaped now and in the DKK 0.453 per kWh, but the applicable period was future also play an increasingly important role in the polit- extended to 42,000 full load–equivalent hours fol- ical decisions. lowing negotiation on a cost-plus basis. • For the subsequent pair of projects (Horns Rev 2 Under the Kyoto protocol [20], Europe agreed to reduce and Nysted 2), the tariff was determined by a com- emissions by 8 percent, although Germany’s individual petitive bidding process, the winning bids being DKK contribution is significantly higher, reflecting (a)  the 0.518 per kWh for 50,000 full load–efufudquivalent wealth of the country, (b) the maturity of the economy, hours at Horns Rev  2 and DKK 0.629 per kWh for (c) the high per capita emissions, (d) the inevitable reduc- 50,000 full load–equivalent hours at Nysted/Rød- tion in emissions in eastern Germany that accompanied sand 2 (note that the original bid for Nysted/Rødsand the modernization of industry there, and (e)  the great 2 was DKK 0.499 per kWh [8], but the successful importance placed on environmental issues in general bidder abandoned the project because the general within the country. Germany has committed to reduc- increase in capital expenditures damaged its finan- ing GHG emissions by 21 percent between 1990 and cial viability). the 2008–12 period [36]. In the early years, Germany’s emissions diminished rapidly, from the 1990 value of Where the wind farm is not following the government 1.248 billion tons of CO2 equivalent, and appeared to be Action Plan, the grid connection must be paid by the on target to reach the goal of 1.017 billion tons of CO2 developer. equivalent. However, the acceleration in growth of the German economy at that time is likely to have resulted in some increase in emissions; hence the need for addi- 8. Full load-equivalent hours (unit of energy): number of hours to tional efforts [23]; [24]. It can be argued that increased generate energy, assuming that the turbine operates continuously at rated power. That is, 1,000 hours generating at 50 percent of rated general national economic well-being does allow greater capacity produces 500 full load–equivalent hours. political leeway for additional funds to be found, and the 32 Regulatory Review of Offshore Wind in Five European Countries presence of the two main political parties in the coalition jointly expected to achieve most of the further reduc- government reduces the risks of future political U-turns. tions in emissions necessary to meet the Kyoto target of around 21 million tons CO2-equivalent, as well as The first National Climate Protection Programme was compensate for a projected rise in emissions from the established in October 2000 [67]. It set a national goal transport sector. The expectation is that the flexibility of a 25 percent reduction in CO2 by 2005—in fact more allowed by emissions trading will ensure that the targets ambitious than the Kyoto target, although it focuses on are met, since renewables, including offshore wind, are a single gas. The review five years later reported that not expected to expand fast enough within the 200812 the 2003 GHG emissions were 18.5 percent down from timeframe. These GHG emission targets were an impor- the 1990 figure, hence within reach of the Kyoto target, tant reason behind the 2010/11 deadlines for the off- although not of the national goal, with energy and indus- shore wind energy support mechanisms, although it is try contributing the most toward achieving this (Figures now evident that offshore wind will not be able to con- 13 and 14) [68]. Under the second National Climate Pro- tribute significantly toward meeting this specific target. tection Programme, the energy and industry sectors are However, subsequent emissions targets are certain to be even more stringent and the availability of alterna- tive policies limited; hence the resulting extension and expansion of support for offshore wind. Figure 13: GHG Emissions 1,200 The total annual savings of CO2-equivalent emissions (m tonnes CO2 equivalent) 1,000 by RE is estimated to be around 101 million tons, with wind energy contributing around 26 million tons of CO2- GHG emissions 800 equivalent [69]—around 11 percent of the total reduc- 600 tion needed and hence clearly a significant contributor 400 to reaching the Kyoto targets. Wind energy now makes 200 a larger contribution to CO2 emissions reductions than 0 hydropower, although outside the electricity sector bio- 1990 1995 2000 2005 2008/12 mass continues to have the greatest impact overall. Target Energy Industry Hence, it can be expected that support for RE, in par- Transport Private household ticular wind both on-land and offshore, will continue. For Small trade/business/services Total emissions example, the new European Energy Policy calls for a tar- get of 20 percent of all energy to come from renewables Source: [68]. by 2020 [26]; [27], an increase over the targets of 12 per- cent by 2008/12 set in 2001 [35]. In parallel with this, the revised EU objective for reducing GHG emissions in Figure 14:  Contribution to CO2 Emissions developed countries is 30 percent by 2020 rising to the Reductions 60–80 percent by 2050, with a commitment of 20 per- cent by 2020 for the European Union as a whole. 80 Contribution to GHG reductions 70 For Germany, the long-term national target for RE is now 60 50 50 percent of primary energy by 2050 [86]. In the shorter 40 term, targets are much less certain, in particular for off- (percent) 30 shore wind energy, since it is not clear yet exactly when 20 10 construction will commence in a major way. However, 0 projections published by BMU in 2009 suggest around -10 1,500 MW by 2011 and 20–25 GW by 2030. This would -20 -30 supply between 85 and 100 TWh per year, or around 15 1990 1995 2000 2005 2008/12 percent of today’s national electricity demand [66]. Target Energy Industry To facilitate this, Germany has one of the world’s most Transport Private household Small trade/business/services successful financial support schemes for RE in the amount of electricity supplied for the marginal cost to the Source: [68]. public [3]; [22]; [11]. The regulations have evolved over the years. The key stages of the development since 1991 Targets and Incentives 33 are summarized in Table 20, with the gradual reduction of although this offshore wind tariff can be termed theoreti- the wind feed-in tariff illustrated in Figure 15. cal, since it is likely that no offshore wind farms will be commissioned before it is superseded, with the possible Following the revision of the EEG in 2004 [60], the theo- exception of the first phase of Alpha Ventus. However, retical basic offshore wind tariff was ac6.19 per kWh, the form of structure was essentially maintained within with an additional premium payable (of ac2.91 per kWh) the 2009 revision. for projects commissioned before the end of 2010 pro- viding a total payment of ac9.1 per kWh. A number of The 2009 revision set the basic offshore wind tariff at other conditions applied, which are described below, ac13 per kWh, with an additional premium payable of Table 20: Overview of German Tariff Laws Date Law English translation of law Comment 1991 Stromeinspeise-gesetzes (StEG) Electricity Feed Act Tariff set at 90% of consumer prices January 1997 Baugesetz-buches Change to Building Code Smoothes planning process; wind turbines recognized as being in the public interest April 2000 Erneuerbare-Energien-Gesetz (EEG) Renewable Energy Act Annual reduction in tariff of 1.5%; applicability of 9 years [59] August 2004 EEG modified Small one-off reduction in tariff, annual reduction of 2% from 2008 in the case of offshore wind, higher rate applicable for minimum of 12 years [60] December 2006 Infrastrukturplanungsbeschleunigungsgesetz Infrastructure Planning Utility responsible for Acceleration Law on- and offshore transmission cable[61] Source: Garrad Hassan and Partners Limited. Figure 15: Feed-In Tariff 20 18 StrEG EEG2000 16 EEG2004 (Onshore) Feed-in Tariff (�c/kwh) 14 EEG2009 (Onshore) 12 EEG2004 (Offshore) 10 EEG2009 (Offshore) 8 Error bars indicate earlier/later period 6 4 2 0 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Year Source: Garrad Hassan and Partners Limited. 34 Regulatory Review of Offshore Wind in Five European Countries ac2 per kWh for projects commissioned before the end appeared to trigger a number of sales of offshore wind of 2015 providing a total payment of ac15 per kWh for projects, which suggests that the incentives may finally the first offshore wind farms. This tariff is only applicable now be at a sufficient level. to projects at least three nautical miles from the coast9 and will be paid for a limited period, a minimum of 12 The EEG undergoes review and revisions at regular inter- years, after which the payments will be reduced to the vals. Discussions on the future strategy continue and, basic tariff of ac3.5 per kWh. To support projects farther given the number of interest groups and decision mak- from the coast and in deeper water, the 12-year stage ers competing to influence the final outcome, the final will be extended by half a month for each nautical mile decision is hard to predict. For example, the 2009 EEG beyond the 12 nautical-mile boundary and by 1.7 months [71] differs from the initial proposals [70]. However, to for each additional full meter in depth beyond 20 m on a date it can be argued that the modifications to the pro- turbine-by-turbine basis. Other conditions are a 5 percent duction incentives and support schemes have tended to reduction per year after 2014 and that the premium will be broadly appropriate and proportionate to the require- not be payable in nature conservation zones or bird pro- ments of the industry at that time. Although it is not tection zones [60]. known whether any particular recommendations will be realized, there is confidence that incentives will be main- The history of offshore wind tariffs leading to the current tained at an appropriate level. status is summarized in Table 21 and Figure 15. The most recent improvement in incentives has been The Netherlands the decision to socialize the offshore grid costs by the transmission system operators (TSOs) for projects within International Commitments the EEZ where construction commences before the end of 2011 [61]. This will have a major impact on project The Dutch contribution to the European Union Kyoto finances, reducing the capital costs by around 30 per- Protocol [20] commitments is an unambitious 6 percent cent with the income remaining the same. The decision reduction of GHG emissions between the 1990 and the 2008/12 accounting period [36]. The Netherlands aims to 9. Coastline defined by maps No. 2920, “Deutsche Nordseeküste achieve this through both energy savings and RE, inside und angrenzende Gewässer, ” edition 1994, XII., and No. 2921, and outside The Netherlands (for example, through Joint “Deutsche Ostseeküste und angrenzende Gewässer, ” edition 1994, Implementation and CDM instruments). XII; scale 1:375.000. Table 21: Offshore Feed-In Tariff Earlier period Later period Tariff Operational years 1–12a years 12–20a 2008 ac6.19 + ac2.91 premium = ac9.10 ac6.19 Current (EEG 2004) [60] 2010 ac5.83 + ac2.74 premium = ac8.57 ac5.83 ac11–14 Previous BMU Proposals [70] 2010–13 ac3.50 reduction 5–7% per year …–2013 ac14 Draft Revised Law [71] 2014 ac12 ac3.50 2015–… ac11.4, etc. i.e., reduction 5% per year …–2014 ac13 + ac2 = ac15 ac3.50 Forthcoming EEG 2009 Law passed by German Bundestag 2015 (ac13*95%) + (ac2*95%) = ac14.25 June 6, 2008, [71] in conjunction ac3.50*0.95 with [81], legally valid from ac13*95%*95% = ac3.33, etc. January 1, 2009 2016–… = ac11.73, etc.; i.e., reduction of 5% per year i.e., reduction of 5% per year a. Additional 0.5 month per full nautical mile beyond 12 nm plus additional 1.7 months per full meter water depth beyond 20 m. Targets and Incentives 35 As elsewhere, energy policy in The Netherlands under- The total value of the incentives has gradually risen to goes regular review and is likely to change further in the a97/MWh since January 2005. They were initially set at coming years, in particular in response to any interna- a68/MWh from July 2003 and then fell slightly before tional agreements that will follow the Kyoto Protocol gradually rising at the six-monthly revision to a67/MWh, and in response to the 2020 RE target that the European then to a68/MWh before reaching the current figure, Union is in the process of setting. which has been stable for three years now [90]. Devel- opers, however, need to ensure that they apply when there are funds available in the budget. At least twice, National Targets for Renewable Energy the scheme has been temporarily terminated when The Netherlands has targets with respect to the propor- that year’s budget was used up—on May 10, 2005, and tion of total energy that should be derived from renew- August 18, 2006. The level of the subsidy varies between able sources (which can include ground source heat and technologies, and onshore wind receives less, currently biomass) by 2010 and 2020, which are 5 percent and 10 a65/MWh for the first 20,000 full-load hours [8]; [91]. The percent, respectively. Since much RE comes in the form levels are calculated annually from an estimate of current of electricity, it is expected that that share will be higher, costs and what financial return the government believes at around 9 percent, in 2010. In 2006, the contribution investors need [108]. Hence, this is a volatile scheme, of renewables to electricity production was 6.5 percent, and developers need to consider whether the tariff is with wind providing 2.36 percent [8]. likely to rise or fall. If, for example, the market price of power has risen during the year, the developer may feel The target for onshore wind power capacity is 1,500 MW the need to apply immediately, before the incentives are by 2010, which was passed during 2007 . Hence, this fig- reduced, to compensate. ure could be seen as much as a cap as a goal, which illustrates the relative lack of commitment in the country In the past, offshore wind farms received a similar level to onshore wind energy. The reasoning usually follows of subsidies, but part of it was as tax incentives. The arguments about the small size and high population den- exemption from the ecotax, REB 36i, was initially worth sity of The Netherlands, although the northeast, which is a60/MWh in 2002 [5], but gradually was reduced first to relatively unpopulated by Dutch standards, has very few a29/MWh in 2003, then to a15/MWh in mid-2004, and wind farms, certainly fewer than immediately across the finally was terminated in 2005 [10]. The total value of the border in northwestern Niedersachsen in Germany. The incentives was maintained, however, by a compensatory consequences are that the main focus of future policy increase in the MEP tariff. has and will remain offshore. In addition, under the Energy Investment Deduction scheme, investors in RE in The Netherlands were able to Specific Offshore Wind Target obtain a tax exception for 55 percent of the taxable profit A target of 6,000 MW of offshore wind energy capac- [5]. This incentive was used by the investors in the Q7 ity by 2020 has been articulated by the Dutch authori- wind farm, which contributed to the complexity of the ties since 2001 [9], this being the third highest goal in financial arrangements and possibly contributed to the Europe, following Germany and the United Kingdom. high headline capital costs [4]. Wind resources in the Dutch sector of the North Sea are very good, and there is sufficient space to extend this in TenneT is the national grid administrator and TSO in charge the future, in spite of heavy demands from shipping. of the Dutch high-voltage grid. It is also the administrative body for implementation of the MEP scheme, through its subsidiary EnerQ, with the Minister of Economic Affairs Incentives overseeing the expenditure of MEP funds. Historically, incentives for electricity production from off- shore wind have been provided in up to three forms in The Netherlands [101]: Spain • As a fixed, feed-in tariff to top up the market price for Kyoto Commitments power, Milieukwaliteit Elektriciteits Productie (MEP) Because of its particular circumstances, Spain is permit- • Exception from ecotax, REB 36i (discontinued) ted to increase GHG emissions by 15 percent above the • As tax benefits, Energie-Investerings-Aftrek, Energy 1990 baseline during the 2008–12 averaging period as Investment Deduction. [106] part of the Europe-wide agreement to achieve an overall 36 Regulatory Review of Offshore Wind in Five European Countries reduction in emissions [23]. The Estrategia Española de Renewable Generation Targets Cambio Climático y Energía Limpia (Strategy on Climate The Spanish government, in line with European policy, Change and Clean Energy) [112] establishes the basis to has set the following targets for RE generation for 2010 achieve this target by means of energy efficiency, reduc- (Plan de Energías Renovables 2010) [114]: ing energy consumption, and generating clean energy. In 2005 GHG emissions were 440.6 million tons of CO2- • 12 percent of primary consumption as minimum equivalent, which means a 52.2 percent increase based • 29.4 percent of electric generation on 1990 levels. The reasons for this increase are in part • 5.75 percent of bio-oil for transportation. historic: until recently, Spain had been less economically developed than its main European neighbors, but has Wind energy is currently the main renewable source of experienced rapid economic growth in recent years. power generation, although biogas and bio-oil contribute to these goals to a minor degree. All other sources have Figure 16 shows the evolution of CO2 emissions. not grown as expected. As a result of this increase, a review of the Span- Offshore wind energy is considered by the government ish Strategy on Climate Change and Clean Energy has to be a decisive source of RE for the medium and long been undertaken. As part of this review, called Urgent term to achieve these and future targets. Currently, no Measures for the Spanish Strategy on Climate Change target has been set for this renewable source. and Clean Energy (Medidas Urgentes de la Estrategia Española de Cambio Climático y Energía Limpia) [115], Spain has good reasons to support everything related to a revised goal of limiting the increase of GHG emissions renewables: to 37 percent compared with the 1990 levels was set for the period 2008–12. This represents 22 percentile points • Kyoto Protocol in higher emissions than the original figure committed • Huge annual increases in energy consumption to by Spain under the European implementation of the • High energy dependence (80 percent of the energy Kyoto Protocol. necessary to cover necessities) • General concern about climate change and sustain- ability. Figure 16: Greenhouse Gas Emission Trends and Projections in Europe, 2007 160 Kyoto Protocol 152.3 commitment period Past trends 2008–12 150 Projections with existing measures Target with KMs and sinks Use of carbon sinks 140 and Kyoto mechanisms (base-year level = 100) 132.8 GHG emissions 130 120 110.0 Kyoto target 110 100 90 1990 1995 2000 2005 2010 Source: [113]. Targets and Incentives 37 The national government has responded by including off- From the point of view of RE, perhaps a more important shore wind in the revised tariffs [116] and establishing a recent development was the agreement in February 2007 consenting regime for offshore wind farm sites [117]. The of all 27 EU states to cut CO2 emissions by 20 percent main details are as follows: before 2020. This overall binding target is to be achieved through more stringent cuts on developed countries to • Competitive price among applicants for the same allow the economic impact of the cuts to be mitigated site, with a maximum feed-in tariff of ac16.4/kWh for less developed countries. In this context, the United • Minimum project size of 50 MW Kingdom has committed to a 30 percent reduction in CO2 • Ministry of Industry, Tourism and Commerce awards emissions by 2020 (based on 1990 levels). This consti- construction permit tutes a very challenging target for the United Kingdom • Ministry of Environment awards concession and is broadly expected to require a substantial shift in • Details to be included in the application are specified the electricity generation framework away from carbon- • Other users are specified and the impact on their intensive technologies. rights needs to be assessed • Procedures for dealing with competing applications Another important recent legislative driver in a longer- for the same site, with a deposit payable of 1 per- term timeframe is the UK government’s Climate Change cent of the estimated capital investment at the start Bill, which was published in draft form in March 2007 . of assessment and a further 1 percent payable by As it stands, the bill will commit the United Kingdom to the successful applicant cutting CO2 emissions by 60 percent before 2050 (again • Application evaluation criteria referenced to 1990 levels). It also includes an intermedi- • Two-year exclusivity to assess wind resources and ate target for 2020, which is in line with the EU agree- undertake environmental studies, with a maximum ment described above. An important assumption of the of one-year extension possible Climate Change Bill is that the United Kingdom may pur- • Permitted flexibility in the characteristics of the wind chase emissions reductions from overseas, if necessary, farm. to contribute toward meeting the targets. However, in general the draft bill is an indication of the UK govern- It appears that the tariff has been set sufficiently high ment’s commitment to cutting carbon emissions sub- to support pilot and demonstration plants, for both the stantially in the coming decades. first bottom-mounted projects of the Spanish wind tur- bine manufacturers and the first floating offshore wind In December 2007 , the government announced a new sites. The competitive element in the regulations means target specifically for offshore wind of a total installed that the Cabo de Trafalgar site should be developed at a capacity of 33 GW by 2020. Although currently not tied to relatively low cost to the public purse. the primary mechanism for encouraging the expansion of RE generation (the Renewables Obligation), the new tar- get will pave the way for future rounds of site awards. The United Kingdom The Renewables Obligation Policy Drivers The Renewables Obligation (RO) was implemented in The United Kingdom is a signatory to the Kyoto Protocol, Britain in 2002 as the primary mechanism for achieving which can be considered the most important interna- the UK government’s target of 10 percent renewables- tional commitment for the UK government in the context generated electricity before 2011. It has been sanctioned of climate change, although it has limited direct rele- in law by the Renewables Obligation Order 2002 [134]. A vance to RE in this particular national market. The proto- further order in 2005 extended the RO to a level of 15.4 col commits the United Kingdom to reducing a basket of percent by 2016. six GHGs by 12.5 percent (compared with 1990 levels) by 2012. Despite a gradual rise in CO2 emissions since The RO places an obligation on electricity suppliers signing the protocol, the United Kingdom is on course to to source an increasing percentage of their demand meet the Kyoto target largely because of a move away from eligible renewables. Suppliers must prove compli- from coal-fired to gas-fired electricity generation through- ance through purchase or generation of ROCs. These out the 1990s. certificates are issued to licensed generators at the rate of 1 ROC per MWh of RE produced. Currently, there is 38 Regulatory Review of Offshore Wind in Five European Countries no technology banding or differential, and hence on its own it favors the cheaper RE technologies—currently Figure 18: Average ROC Sale Price at Auction, onshore wind. 2002–08 60 An alternative to procuring ROCs to meet an electric- Average ROC Value (GB £/ROC) ity supplier’s RO is to pay the “buyout” price, which 50 for a recent “compliance period” (2006/7) was £33.24 40 per MWh and for the most recent compliance period (2007/8) was £34.30 per MWh. This price is linked to the 30 retail price index (a national measure of inflation) and is 20 revised annually. All such payments feed into the buyout 10 fund that is redistributed (or “recycled”) to licensed ROC producers in proportion to their RE contribution to the 0 2 -03 -03 -03 -04 -04 -04 -05 -05 -05 -06 -06 -06 -07 -07 -07 -08 -08 RO in the given compliance period. -0 Oct Feb Jun Oct Feb Jun Oct Feb Jun Oct Feb Jun Oct Feb Jun Oct Feb Jun The price of a ROC is the driving force behind the market Source: Non-Fossil Purchasing Agency. for renewables in the United Kingdom. Factors determin- ing the price of a ROC are the buyout price and the so- called recycle benefit, as well as the scale of renewables serves to keep the ROC value relatively high and stable deployment in any given year. Electricity suppliers can throughout this period. opt to meet their obligation by paying the buyout price, and the funds accrued in this way are paid to suppliers As well as the annual recycling of the buyout fund, quar- complying through purchase of renewables. The less terly auctions of ROCs are held by the Non-Fossil Pur- the obligation is met through bona fide renewables, the chasing Agency offering the opportunity for electricity more a ROC is worth, and vice versa. suppliers to buy ROCs rather than opting for the buyout route. Figure 18 presents the average ROC sale price Figure 17 presents an overview of the performance of achieved at the 20 ROC auctions that have taken place the RO to date with the overall obligation, compliance to date under the RO. As can be seen, to date the market to that obligation, and the average ROC value (to the price of the ROCs has remained relatively stable. electricity supplier) plotted against the four compliance periods completed to date. As can be seen, the level As the obligation nears its target, and as more projects of compliance is in the range of 60–75 percent, which develop, the value of ROCs from a project drops as it becomes a buyers’ market. Because of this effect, and the general uncertainty surrounding the nature of the market beyond 2010, concerns were expressed as to Figure 17: Average ROC Value and RO Compliance, the financeability of projects the payback time for which 2002/3–2006/7 would extend beyond 2010. The government’s response to these concerns was to implement further progressive ROCs submitted increases in the RO, culminating in 15.4 percent by 2015, Obligation (no ROCs) after which time this level would be held out to 2027. Average ROC value 25,000,000 60 Average ROC Value (£ / MWh) 50 Reform of the RO 20,000,000 Industry has alluded to the need for additional increasing Number of ROCs 40 15,000,000 targets to at least 2020, to give some security for longer- 30 term projects, but it seems that the government is not at 10,000,000 present amenable to further increases before substantial 20 progress is made on existing targets. However, to allevi- 5,000,000 10 ate concerns related to the long-term stability of the ROC 0 0 market, as part of the proposed reforms to the RO an 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 extension of the obligation in each year, known as “head- Compliance period room” of 6 percent of the expected ROCs within a given compliance period, has been put forward. Source: Garrad Hassan and Partners Limited. Targets and Incentives 39 The intention of this measure is to create a viable ROC are signs that the industry has already gained some market in the scenario that deployment of renewables level of confidence in response to the proposals, with is higher than anticipated in the period beyond 2015 increased activity in the offshore industry in the United and to prevent the penalization of a successful industry Kingdom. The impact of these reforms on the market because of the mechanism of the RO. However, if the value of ROCs has been of some concern, in particular RO is not met through generation of ROCs in the period for onshore wind developers who perceive the risk of 2015–20, it will remain at 2015 levels throughout this a price crash as a result of the overstimulus of the off- period and beyond to 2027 . In essence, implementation shore wind market. The proposal for headroom in the RO of headroom in the obligation is thought to be a means as described above has been designed to alleviate such for the government to avoid the extension of the RO to concerns. ~20 percent by 2020 in order to side-step allegations of huge subsidies to RE in a low-build, high–ROC value sce- Other Benefits and Incentives nario between 2015 and 2020. The Climate Change Levy (CCL), introduced in April 2001, The government recognized early in the process that is essentially a tax on business and public sector energy onshore wind alone would not be sufficient to meet its users in the United Kingdom. Renewably generated elec- targets, and that technologies such as offshore wind and tricity is exempt from this tax, which initially provided a wave power would be required in volume. Initial mar- value of up to £4.3/MWh to such electricity and £4.56/ ket support for offshore wind was therefore provided MWh for the year 2008/9. through additional capital grants to kick-start the industry for a long-term future. To date, capital grants have been All generators of electricity in the United Kingdom are awarded to UK projects once they are in receipt of all subject to charges levied by the network operator. Such the relevant consents. Only Round 1 offshore wind proj- “use-of-system” charges are applied either by distri- ects in the United Kingdom are eligible for such support bution or transmission network operators, or by both at present, with each project eligible for grants of up to depending upon the location of the grid connection £10M from a total fund of £102M. point for the project. Given their size, the vast majority of Round 2 projects plan to connect directly to the trans- Following the slower-than-expected build-out of Round 1 mission network in the United Kingdom, whereas Round and in the face of rising capital costs for offshore wind 1 projects are typically scheduled for connection into projects, the UK government amended the RO to provide the distribution network. The magnitude of the system differential support to various renewable technologies as usage charges depends on the region of interest and part of the Energy White Paper 2007 [123] (and associ- can in some cases be negative, with the project owner ated consultation exercise [135]). In the future, genera- receiving payments from the network operator. This sys- tors will receive a “ROC Multiple” of an RO certificate for tem is designed to help pay for additional infrastructure each MWh generated, with that multiple being technol- costs associated with accommodating additional genera- ogy-specific, as summarized in Table 22. tion in areas of low demand. Reform such as this requires primary legislation (a change Power sales can account for more than 50 percent of an in the law) to bring the proposals into realization.,There offshore wind project’s revenue to date, which is usually Table 22: Summary of Proposed UK ROC Banding Band Technologies ROC multiple Established Sewage gas, landfill gas, cofiring of nonenergy crops 0.25 Reference Onshore wind, hydro, cofiring of energy crops, energy from waste with CHP 1 Postdemonstration Offshore wind, dedicated regular biomass 1.5 Emerging Wave, tidal stream, advanced conversion, biomass (energy crops), regular biomass 2 with CHP , solar PV, geothermal Source: Garrad Hassan and Partners Limited. 40 Regulatory Review of Offshore Wind in Five European Countries facilitated through a fixed-term (typically 3–5 years) Power Purchase Agreement with a utility that will typically also Figure 19: UK Spot Power Prices include a package price for ROC- and CCL - derived value. This agreement may include some risk-sharing mecha- £140 nism in relation to the ROC recycle benefits. To date, £120 there has been little or no direct trading of electricity pro- (GBP/MWh) (SSP) £100 Electricity Price duced by wind farms in the United Kingdom on the spot market (Figure 19). However, prices can be expected to £80 track each other, albeit with an appropriate discount to £60 reflect volatility-associated risk. £40 £20 Comparative Summary £0 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Table 23 provides a comparative summary of targets Monthly average of Daily Minimum Monthly average of Daily Average and incentives for offshore wind for the five countries Monthly average of Daily Maximum Annual average of Daily Minimum Annual average of Daily Average Annual average of Daily Maximum considered. Source: Elexon. Table 23: Comparative Summary—Targets and Incentives Country Summary of targets and commitments Tariff summary Assessment Denmark 30% RE supply by 2025 •  Competitive tender: 0.518 and DKK 0.629/ •  Low to ~150 MW offshore wind installation per year •  kWh (first 50,000 full-load hours) for recent moderate Goal of 4.6 GW offshore wind by 2025 •  projects; DKK 0.36/kWh subsequently Grid connection provided and paid for by •  Competitive tender price could be higher and •  utility for longer TOTAL ~ €67/MWh Germany 50% RE supply by 2050 •  ac12/kWh (basic EEG) •  Very good Plans for 25 GW offshore wind by 2030 •  + ac2/kWh (premium for projects coming •  Grid connection provided and paid for by util- •  into operation before 2014) ity (commence construction before 2015) TOTAL ~ €140/MWh Spain Regulatory regime and feed-in tariffs •  Competitive feed-in tariff •  Good specified (long-term  TOTAL ~ a164/MWh (maximum) Grid connection provided and paid for by •  prospects) project Netherlands 10% RE supply by 2020 •  MEP tariff for renewable electricity (adjusted •  Moderate Target of 6 GW offshore wind by 2020 •  annually by government) Grid connection provided and paid for by •  Tax benefits (EIA) •  project TOTAL ~ €97/MWh United Kingdom 15.4% renewable electricity supply by 2016 •  Market electricity price •  Good Aspiration of 20% RE supply by 2020 •  RE certificates •  Achieved through certificate trading system •  Tax break (climate change levy) •  Grid connection provided by independent •  Upward adjustment for offshore wind likely •  TSO and paid for by project TOTAL ~ €115/MWh Note: Currency conversion assumptions: a/DKK = 0.134, a/SEK = 0.109, and a/£ = 1.45. The EEG is regularly amended to adapt tariffs to current market conditions and new technological developments. The most recent amendment took place in 2008 with new tariffs and regulations that took effect on January 1, 2009. Source: Garrad Hassan and Partners Limited. 4 Regulatory Framework This chapter reviews the regulatory framework for off- shore wind in each of the five countries of interest, spe- Figure 20: Zones from UNCLOS, 1982 cifically the following topics: International waters • Key applicable laws and conventions • Concession award and seabed ownership • Licensing and consenting Continental shelf • Government bodies • Grid access • Power offtake • Specific environmental regulations. Exclusive Economic Zone (200 nautical miles) Key Applicable Laws and Conventions Perhaps the most important international convention 200 affecting the development of offshore wind farms for nautical miles all five countries of interest is the United Nations Con- vention on the Law of the Sea (UNCLOS) 1982 [21]. Contiguous zone (12 nautical miles) The convention sets out rules for the use of the world’s oceans, defines the rights and responsibilities of nations, Territorial waters (12 nautical miles) and includes provision of guidelines for businesses. Of principal importance in the context of offshore wind proj- ect development is the delineation of zones extending Internal waters Baseline from the coastline of a country out to sea and the rights that country has in each zone. These zones as defined in UNCLOS are reproduced in Figure 20. Land Within territorial waters the coastal state has the right to set laws and regulate the use of any natural resources. Between 12 and 24 nautical miles from the coastal Source: Reproduced under GNU Free Documentation License. baseline is defined as the contiguous zone within which 41 42 Regulatory Review of Offshore Wind in Five European Countries countries may enforce certain specific regulations with the size of which matches the dimensions of the wind respect to smuggling and immigration. Beyond this and turbines. In general, an Environmental Impact Assess- out to 200 nautical miles10 from the baseline is the EEZ, ment is required for any proposed offshore wind project. within which the coastal state has sole exploitation rights The DEA will issue the consent in three steps before an over natural resources. offshore wind farm can be established: In practice, this means that offshore wind projects may be 1. A scoping (preinvestigation) permission must be built anywhere within the EEZ, although its location will obtained before environmental and technical survey- determine which national laws the development is sub- ing work can start. ject to. In addition, the nation in question will need a legal 2. Permission for constructing the wind farm is granted framework in place to deal with such proposals. How- after application delivering the preinvestigation ever, the scope of national law will, in some aspects, be reports. more restricted than in territorial waters, including most 3. Permission for energy production must be obtained notably the inability to establish rights of navigation. before commissioning of the farm, typically for 25 years. The application must be followed by a docu- mentary report demonstrating that the conditions The European Union given have been followed. When a project is larger As identified in the section on the European Union in than 25 MW, the operator needs a concession to Chapter 3, which examined targets and incentives at produce electricity. the European level, European Directives are the principal measure for implementing Europe-wide policy. The prin- All permissions are granted by the DEA, which consults cipal directives of relevance are those all relevant parties in the consent process. The Danish consenting process for offshore wind can in this sense • Relating to GHG emissions [36], which specify how be called the “one-stop-shop” approach, as espoused in the overall target of reductions in emissions will be the Copenhagen Strategy [47]. The rules are formulated allocated between the countries; this is achieved in the Act of Energy Supply [44]. A one-stop-shop implies through negotiations between the countries—in that the project developer has a single point of contact general once the overall target has been set and within the government for all consenting issues and that publicized this government department is then responsible for com- • Relating to promoting use of RE; this is currently munication with all other interested government bodies undergoing revision with new targets for 2020 being (Figure 21). set [29]. Germany In addition, there are numerous laws and conventions The authority responsible for the offshore wind farm relating to how the environmental impact needs to be permitting process depends on the location. Within the assessed. These are described in the section on spe- territorial sea, it is the regional (Bundesländer) authori- cific environmental regulations in the European Union in ties, that is, Mecklenburg-Vorpommern, Schleswig-Hol- Chapter 4. stein, or Niedersachsen, while in the EEZ, it is the federal (national) authorities. Hence, a wind farm in the EEZ will Denmark require a wind farm and cable permit from the federal authorities, as well as a cable permit from the regional Wind farms close to the coast can be accepted only in authorities. exceptional cases and only where a concrete assess- ment can demonstrate that the project has a minor The federal permitting process (for projects in the EEZ) is impact on the landscape and will not affect areas with relatively clear today and is led by the BSH (Bundesamt significant cultural monuments or marine-biological and für Schifffahrt und Hydrographie; Federal Maritime and geological interests. Such exceptional cases may, for Hydrographic Agency), which also coordinates the appli- example, be in direct proximity to technical installations cation for the cable permit within the territorial sea. The regional permitting process (for projects in the territorial sea) depends on the law within the particular region and 10. In cases where there are fewer than 400 nautical miles between two or more countries’ coastal baselines, nominally the median line is based on the on-land wind farm permitting process. is taken as delineating the respective EEZs. However, it is worth not- ing that some areas have specific agreements deviating from this, and others are the subject of disputes between countries. Regulatory Framework 43 Figure 21: Denmark’s “One-Stop-Shop” Consenting Mechanism Concession Strategic planning Consenting Stakeholders Developer DEA Grid Eltra connection Incentives Government policy Source: Garrad Hassan and Partners Limited. Turning to the EEZ procedures, the permitting process u Safety in all components of the projects and follows the regulations set within the following federal throughout the lifetime laws: u Use of state-of-the-art technology for surveys and technology • Seeanlagenverordnung (SeeAnlV) (Marine Facili- u Visual markings ties Ordinance) [62], which allows permission to be u Design of the structure to minimize the conse- granted for construction and operation of commer- quences of ship collisions cial structures offshore, and a revision, article 3a, u Minimization of noise (impact on fauna) which allows regions to be specified as suitable for u Financial guarantees to ensure decommis- offshore wind farms. However, this does not remove sioning. the need for the developer to demonstrate that the • Seeaufgabengesetz (SeeAufgG); Maritime Federal impacts are acceptable. The main reasons an appli- Responsibilities Act, which ensures that new con- cation could be rejected are the following: struction offshore does not impair navigation [63] u If navigational installations and markings would • Infrastrukturbeschleunigungsgesetz (InPBeschlG); be affected Infrastructure Acceleration Law, December 2006, u If shipping lanes or airspace would be disrupted. which assigns the costs of the offshore and onshore The criteria are a minimum distance of 2 nauti- transmission cable to the utilities for offshore wind cal miles to the main shipping routes and the farms where construction commences before the installation of an AIS (automatic identification end of 2011. [61] system) on wind turbines u If the marine environment could become Turning to the territorial sea procedures, the permitting polluted process follows the regulations set within the relevant u If bird migration would be endangered. The regional laws: criteria are the number of birds likely to be a casualty of the wind farm, bearing in mind that • Raumordnungsverordnung (ROV), Regional Planning migration itself causes a high casualty rate. Act, which specifies the laws that must be complied • The duration of the permit is 25 years, and construc- with to obtain permission; 13 December 1990 [64]. tion must begin within 2.5 years; however, delays • Bundesimmissionsschutzgesetz (BimSchG); Gesetz in obtaining the grid connection usually make this zum Schutz vor schädlichen Umwelteinwirkungen impossible. The license itself is a substantial docu- durch Luftverunreinigungen, Geräusche, Erschütter- ment, on the order of 100 pages, and details condi- ungen und ähnliche Vorgänge, 1974, Federal Pollution tions concerning Control Act; permitting of wind farms on land and 44 Regulatory Review of Offshore Wind in Five European Countries within territorial waters where permission is granted The authority responsible is the Ministerio de Indus- by the regional authorities (Bundesländer) [65]. tria, Turismo y Comercio, through Dirección General de Política Energética y Minas. This Royal Decree The BSH has published three legally binding standards involves the following: to guide the site surveys, environmental studies, and u Royal Decree 661/2007 , which regulates energy design processes. In general, the conditions in the per- production for renewable and nonconven- mits will specify compliance with the following: tional sources of energy. The authority respon- sible is the Ministerio de Industria, Turismo y • Standard for Geotechnical Site and Route Surveys— Comercio. Minimum Requirements for the Foundation of Off- u Royal Decree 1995/2000, which regulates the shore Wind Turbines and Power Cable Route Burial transport, distribution, trade and supply activi- Assessments, Standard Baugrunderkundig, Minde- ties, and authorization procedures for electrical sanforderungen für Grundungen von Offshore-Win- energy installations. The authority responsible is denergieanlagen, 2003 [76] the Ministerio de Economía. Three other orga- • Standards for Environmental Impact Assessments of nizations take on important responsibilities in Offshore Wind Turbines in the Marine Environment, this matter: Operador del Mercado Ibérico de which was revised in 2007 . An English translation of Energía (OMEL), Red Eléctrica Española (REE), the old edition (2003) is available, Standard—Unter- and Comisión Nacional de Energía (CNE). suchung der Auswirkungen von Offshore-Windener- Details are given in the section on power offtake gieanlagen auf die Meeresumwelt (stUK 3), February in Spain in Chapter 4. 2007 [77] u Royal Decree 1302/1986, which guides the • Construction of offshore wind energy plants, Stan- environmental impact assessment process. The dard—Konstruktive Ausführung von Offshore-Wind- authority responsible is the Ministerio de Obras energieanlagen, June 2007 [78]. Publicas y Urbanismo. u Law 22/1998 concerning coastal regulation. The wind farm permit is given following completion of The relevant authority is the local authority with the surveys, which must be undertaken according to the responsibility for the affected part of the coast. standards specified. The BSH is obliged to grant permis- sion, unless the wind farm or related activities represent Royal Decree 1028/2007 was the first legal statute to a danger to the marine environment or to marine traffic. specifically mention offshore wind energy at its creation in July 2007. No further laws specifically mention offshore wind, apart from governing the feed-in tariff. The Netherlands The key applicable laws and conventions for the North The United Kingdom Sea are as follows (the inland IJsselmeer falls under dif- ferent regulations): Three key areas of law are of importance to the develop- ment of offshore wind farms—those affecting conces- • Dutch law governing federal waters (Wet beheer sionary rights, consenting, and health and safety. rijkswaterstaatswerken or Wbr), including the whole EEZ [91] Concessionary Legislation • Dutch Ministry of Economic Affairs, MEP Scheme, The most important legislation affecting concessionary until August 2006, followed by the Sustainable rights for offshore wind farms in the United Kingdom are Energy Incentive Scheme (Stimuleringsregeling the Energy Act 2004 and the Marine Bill 2007 . In addition, duurzame energieproductie; SDE), which became the Renewables Obligation Order 2005 is the key piece effective in April 2008. of legislation driving the development of RE in the United Kingdom, which is described in the section on the United Kingdom in Chapter 3. Spain The principal laws governing the administrative proce- Consenting Legislation dure for developing an offshore wind farm are: A number of laws affect consenting for offshore wind projects in the United Kingdom, which are described in • Royal Decree 1028/2007: Establishes the adminis- the section on licensing and consenting in the United trative procedure for installing offshore wind farms. Kingdom in Chapter 4. Regulatory Framework 45 Health and Safety Legislation markets, this process is closely linked to or conditional Many laws and regulations in the United Kingdom are on the developer’s obtaining all statutory consents for relevant to health and safety for offshore wind farm the project, whereas in others the processes are less development, construction, and operation. An exhaustive closely related. description of these is not provided here, for the sake of brevity, and only the most important are outlined below. A more extensive summary is provided by the British Denmark Wind Energy Association [118]. The Danish government has the sole right to utilize wind energy within territorial waters, the contiguous zone, • Health and Safety at Work, and so forth, Act 1974 and the EEZ. Consent can be awarded to projects on the This legislation, known as the HSW Act, covers basis of the Act of Electricity Supply [44]. employers’ legal responsibilities to ensure that the health, safety, and welfare of their employees are Two ways of applying for establishing a project exist: protected. Importantly, the act is applicable to all contractors engaged to work on a wind project, such 1. Applying at the tender issued by the DEA that they must ensure that their activities are not 2. Applying via the “open door principle, ” where after endangering their employees or third parties. the DEA is open to interest shown in a particular site • Construction (Design and Management) Regulations SI and, if interest is shown, a tender will be established 1994 No.3140 between the parties. These regulations, referred to commonly as CDM, are relevant to many aspects of offshore wind devel- The main differences between the two procedures are opment and are in particular designed to ensure that the cable connection to shore from the wind farm in coordinated management of health and safety situation 2 must be carried by the operator and that the issues across the various companies and individu- revenue will be based on the onshore rules. In situation als involved in the project. Guidelines are published 1, the grid operator will cover the cost to the defined by the UK Health and Safety Executive on the CDM farm grid connection point, and the revenue will be sub- Regulations [136]. jected to negotiation (tender). • The Docks Regulations SI 1988 No.1655 These regulations impose health and safety require- Both methods have been used by developers in Den- ments for all dock operations in Great Britain and mark. The most important limitation experienced has within territorial waters. been the requirements for financial strength of the appli- • Diving at Work Regulations SI 1997 No. 2776 cant to cover risks during construction and the 25 years These regulations enforce health and safety prac- of operation. tices for all commercial diving operations and outline the steps required of employers and employees to mitigate risks associated with diving operations. Germany • Electricity at Work Regulations SI 1989 No. 635 In Germany, the concession to the site is awarded as part These regulations specify the principles of safety in of the construction permit. Hence, the same authorities relation to electricity generation and transmission. apply: the federal authorities for the seabed in the EEZ They stipulate the precautions that should be taken and the regional (Bundesländer) authorities for the near- against the risk of death or injury from electricity and shore band between the coast and the 12 nautical-mile the duties of relevant persons to ensure that such limit. precautions are taken. An initial claim to the site is achieved once a fully com- plete application has been lodged with the BSH authori- Concession Award and Seabed ties. The BSH authorities process applications through Ownership a number of stages, which are entered once the appli- cation is compliant and all necessary documentation Concessionary award, sometimes referred to as a “lease,” is complete. Applications are processed in the order in provides a company with the right to exploit defined nat- which they are accepted into the system, not necessarily ural resources within a specified area of the sea. Such the order in which they are received, with the applica- award is principally administered by the national body tion needing to be final and complete to enter the queue. that retains ownership of the seabed. In some national Hence, an earlier application will be processed first and 46 Regulatory Review of Offshore Wind in Five European Countries will receive a decision on the merits of its details before the EEZ. It is mandatory to perform an EIA for offshore any other application for the same area can be decided wind farms. on, but an early incomplete or noncompliant application will result in the authorities requesting additional infor- The process for applying for full consent for an offshore mation, during which other applicants could apply for the wind farm involves the following main steps: same site and obtain priority. • Submit inception memorandum (startnotie) • Receive guidelines (richtlijnen) The Netherlands • Apply to The Netherlands Commission for Environ- The Dutch EEZ covers an area of 58,619 km2, with water mental Assessment for permits depths mainly between 20 and 40 m. The whole of the • Enter inspection and consultation procedure. North Sea (not just the Dutch part) is intensively used for many different purposes and has important ecological Seabed concessions are awarded on an exclusive basis, value. In addition to the existing economic exploration and consents are awarded through the same broad pro- cess outlined above. In this sense, only a single process (fishing, oil and gas exploration, sand and gravel extrac- need be followed to gain all necessary permits to con- tion, cabling and pipelines) development of offshore struct, commission, and sell power from a wind farm. wind energy generates additional pressure on the area. Rules to allow installations outside the 12-mile zone were It has been recognized in The Netherlands that a num- finally established in December 2004 after several years ber of other detailed permits will have to be issued, for in preparation under the Dutch law governing federal example, for landing ships during installation and main- waters (Wbr), when it was extended to the whole EEZ. tenance, cabling through the dunes, and working condi- The Wbr now guides the central government (specifically tions. As far as possible, a “one-desk” policy has been the Ministry V&W, see the section on government bod- developed to streamline the process. ies in The Netherlands in Chapter 4) in spatial planning in Figure 22: Permitting Procedure in Spain Offshore Royal Decree 1028/2007 Competitors Strategic Environmental First applicant Study (SES) Bidding process Characteristics of the applied Marine Zone 8 months 4 months 2 years for measuring Construction Commissioning 24 months Project approval 24 months Administrative Authorization Application Administrative Authorization Occupation Permit 24 months Source: Garrad Hassan and Partners Limited. Regulatory Framework 47 Spain rounds of site awards in 2000 and 2003. The section on the United Kingdom in Chapter 2 provides more informa- As mentioned above in the subsection on Spain in Key tion on the rollout of both of the CE rounds. Applicable Laws and Conventions, the administrative procedure (Figure 22) for offshore installations in Royal Round 1 was designed to provide a demonstration phase Decree 1028/2007 can be divided in two steps: for offshore wind in the United Kingdom, and projects were restricted as follows: 1. Initially, the government gives permission to the developer to study the area in depth in order to carry • Number of wind turbines: up to 30 per project out a characterization of the zone report that will be • Minimum installed capacity: 20 MW publicly accessible to all. In this report, there must • Project location: within UK territorial waters be an estimation of the capacity factor. It should be (<12 nautical miles) noted that the preparation of this report occurs before • Project footprint: up to 10 km2 the beginning of the measurement campaign. 2. After that, the bidding process starts, and any others The restrictions on size and location led to the award of developers can apply for the exploitation of the area relatively shallow sites close to the coast, with no project already studied. There is a commission formed by exceeding a maximum water depth of 20 m or a distance representatives of all authorities involved. This com- from the coast greater than 12 km. mission will decide which project is the best, based on the following: No development regions or zones were defined for Round u Legal, technical, and economical capacity of the 1, and developers were given freedom to apply for leases developer anywhere within territorial waters. Arguably, this lack of u Installed capacity (which cannot be changed in a control over the geographic location of proposals has later stage of the project) led in at least one instance to the award of technically u Proposal of the price of the energy output or environmentally unfavorable sites. This deficiency in u Estimation of the capacity factor the process was addressed to some degree in Round 2 u Description of the technology considered in the through the restriction of site awards to specified strate- project gic areas (albeit very extensive areas), the definition of u Economic, environmental, and social impact of which was informed by some degree of technical feasibil- the project. ity study and, crucially, an SEA. The results of the SEA for the three areas in question led the DTI to recommend an Finally, the government licenses the developer for build- exclusion zone 8–13 km from the coast in order to miti- ing and awards the public sea area. gate visual impact and specific environmental concerns relating to certain bird species. The following chart summarizes the administrative pro- cess detailed in RD 1028/2007: No capacity limit was placed on lease applications for Round 2 sites leading to substantially larger sites—the The United Kingdom maximum planned installed capacity of the successful project applications being 1.2 GW. A maximum spatial Concessionary Awards and the Crown Estate area limit of 250 km2 was set for any one project. In the United Kingdom an organization called the Crown Estate (CE) owns the seabed within territorial waters, For Round 2, the Crown Estate charged successful appli- as well as rights to exploit resources throughout the UK cants a one-off option fee that varied according to the continental shelf, which encompasses the EEZ. The role spatial area of the seabed for each site. This varied from of the CE is to enhance its assets and generate revenue £25,000 for a small extension up to £0.5 million for a for the UK government. The CE is a department within project with an area of between 150 and 250 km2. Once the UK Treasury. operation commenced, Round 2 projects were to be sub- ject to rental payments for their lease based on an index In conjunction with the DTI, the Crown Estate has played linked rate of £0.88 per MWh, which was likely to con- a central role in the creation of a viable regulatory frame- stitute approximately 1 percent of gross revenues from work in the United Kingdom for offshore wind. This has power sales plus incentives. been implemented primarily through two successive 48 Regulatory Review of Offshore Wind in Five European Countries No firm announcements have yet been made with There have not been any follow-up studies connected respect to the arrangements for Round 3 of site awards, to the last two large projects to achieve consent (Horns although the timetable for this is expected to involve new Rev 2 and Nysted/Rødsand 2), which may be because site awards during 2009. the two projects are neighbors to the first demonstration projects, where no critical issues were found. The Energy Act 2004 In order to establish a legal framework for RE projects outside of UK territorial waters, new legislation was Germany required. This was enacted in the Energy Act 2004 [124], The primary consent for a wind farm in the EEZ is the which established a Renewable Energy Zone adjacent to Seeanlagenverordnung (SeeAnlV) Marine Facilities Ordi- territorial waters and encompassing the UK EEZ. The act nance [62], which will also require the facility to comply requires developers to apply for consents under the Elec- with the requirements of the Seeaufgabengesetz (See- tricity Act 1989 and extended the jurisdiction of the CE to AufgG); Maritime Federal Responsibilities Act [63]. This encompass the granting of leases within the Renewable involves the following procedures: Energy Zone. • Application is submitted to BSH. The Marine Bill • BSH assesses whether application is complete, The concessionary regime in the United Kingdom is including whether sufficient detail is included. If not, likely to be affected to some degree by Marine Bill 2007 , applicant has the opportunity to make a revision. a white paper that is currently the subject of consultation • First round of consultations is initiated with other with stakeholders [137]. The bill itself is designed to con- interested agencies: regional shipping authority and solidate existing legislation affecting the marine environ- federal mining, environment, and nature conserva- ment, as well as to facilitate strategic planning that takes tion authorities. into account both environmental and economic concerns. • Second round of consultations is undertaken with At this time, the direct implications for wind farm conces- additional consultees. sions are unclear, since the current white paper outlines • A conference is held where the applicant presents the framework for future marine spatial planning at a stra- the project and the scope of the studies that are tegic level rather than the plans themselves. necessary. • The applicant undertakes an EIA (for projects with more than 20 wind turbines) and shipping impact Licensing and Consenting studies, and submits reports. At this point, the appli- cant has priority.11 Denmark • BSH coordinates assessment of the application by relevant authorities in the form of comments and These issues are largely covered in the sections on key discussions. applicable laws and conventions in the European Union • BSH publicizes the application and invites public and on concession award and seabed ownership in Den- comment. mark in Chapter 4. However, the following comments • BSH assesses the application, in particular the envi- are made in addition to this. ronmental impact study and shipping impact study (which is carried out by the Waterways and Shipping It should be recognized that, because of the uncertainty Directorate). associated with the environmental impact of offshore • The permit is issued, including conditions. wind farms, the DEA has practiced the following strat- egy for larger applicant farms. If the project is relatively The approval for the onshore leg of the cable is given large (size not defined, but if the level of the demonstra- by the regional administration agency that is coordinating tion projects in the first Action Plan is used, the figure the various regional and federal agencies to be consulted is larger than 150 MW), the developers have to carry or asked for approval. The particular issues to consider out an intensive, in-depth follow-up study focusing on a are nature conservation; conservation of cultural heri- few characteristic issues relevant for the actual site. An tage; and crossing of federal, regional, or locally owned international panel of scientists is asked to oversee the programs through a monitoring panel. The cost of these programs is paid for by the developer, who is expected to 11. Previously, an applicant had priority from the point of initial sub- recover the cost through the tariff awarded for the project mission to allow sites to be blocked. This changed on November 15, (see the section on the European Union in Chapter 3). 2001, with a change to BNatSchG, which consequently modified SeeAnlV. Regulatory Framework 49 roads, railway lines, dikes, and rivers. It can be labori- region was declared.12 In addition, construction permits ous, since ownership is spread widely. For example, the have been awarded to sites outside these regions. 70 km-long onshore transmission cable for the ENOVA North Sea project traverses 700 plots of land owned by 400 different people. The Infrastrukturbeschleunigungs- The Netherlands gesetz [61] transferred responsibility for the permitting, Through the Dutch law governing federal waters, Wbr, as well as the costs, of the transmission cable to the offshore wind energy must take into account the envi- utility. Since it is unclear whether failure by the utility ronment and ecosystem of the North Sea, as well as to provide a grid connection on time will be sufficiently consider areas of other types of dedicated use (such compensated, some developers are continuing to pursue as military areas, shipping routes, disposal sites, search their transmission cable application. Once complete, the areas, coarse sand resources, and cable routes). The law permits would be passed on to the utility, which would in principle opens up the entire EEZ to the permitting of compensate the developer for the costs it has incurred. wind farms. In practice, however, in a number of areas wind farms will simply not be permitted (or possible). Appendix B to this report provides summary details of how a number of offshore wind farms have experienced The Wbr policy describes the building permit require- the planning and consenting process. Generally, the pro- ments that a request must satisfy, and the information cedures were slow, no doubt because of the enormous required as a minimum will be as follows: volume of applications coupled with a scarcity of ability to carry out the extensive environmental impact studies • Coordinates of the wind farm boundaries and a lack of experience within the authorities of pro- • Type and design of the wind farm cessing this type of application. • Information about the “utility and necessity” of the wind farm To date, two offshore projects have been rejected, both • Information about the impact on the rightful use of in the Baltic Sea, and both because they were located on the sea by others seabed that has been incorporated into a Natura 2000 • Information about the impact on the environment site. • An erection and construction plan • A maintenance plan Following SEAs, in December 2005 three regions were • A safety plan declared as being particularly suitable for offshore wind • A marking plan based on the International Associa- energy: one in North Sea at Nördlich Borkum [73] and two in tion of Lighthouse Authorities (IALA) recommenda- the Baltic Sea at Kriegers Flak [74] and Westlich Adlergrund tion on the marking of offshore wind farms [75]. Dedicating specific areas for offshore wind energy is • An emergency plan a tool of proactive planning on the part of the government • The intended time of use to ensure a planned and orderly development rather than • A decommissioning plan react to individual applications that are launched. It is eas- • A certificate of the design assessment of the wind ier to obtain planning permission within these dedicated turbines. areas, since a general environmental impact assessment has already been carried out by the federal government. The relevant permit documentation can be found in Dutch Permits outside the dedicated areas are significantly more at [109]. The consents experience in The Netherlands is difficult to obtain, and in the equivalent onshore areas, overviewed in Appendix C. wind farm development is strictly limited to such dedi- cated areas. Offshore, the particularly suitable areas are seen by BSH as areas where wind farms with more than Spain 80 turbines may be permissible in the future. These issues are included in the administrative procedure described in RD 1028/2007 and included in the flowchart The Nördlich Borkum site consists of three separate in the section on concession award and seabed owner- regions and covers four projects: Borkum Riffgrund ship in Spain in Chapter 4. West, Borkum Riffgrund, Borkum West/Alpha Ventus, and Godewind. The Kriegers Flak region covers a single project, Kriegers Flak, while Westlich Adlergrund covers 12. For example, Alpha Ventus (Borkum West) received the wind farm two projects, Arkona Becken Südost and Ventotec Ost 2. permit on November 9, 2001, and the cable permit on December 15, All these projects have received wind farm construction 2004, and both Borkum Riffgrund and Borkum Riffgrund West were permitted on February 25, 2004. All dates were earlier than the dec- permits, although in some cases, this was before the laration in December 2005 of the offshore wind energy regions. 50 Regulatory Review of Offshore Wind in Five European Countries The developer must submit the licensing for building to A brief summary of each relevant piece of legislation the Ministry of Industry, Tourism and Trade together with follows. the Environmental Statement and the request to be con- sidered as a special generator in order to benefit from Electricity Act 1989 (EA)—Section 36 [125], the bonus system. Following this and if the environment as Amended by the Energy Act 2004 impact study has a positive result, the awarding of the Consent is required for all offshore wind developments public sea areas will be considered by Coastal General that are within territorial waters and above 1 MW Direction. installed capacity. At the same time that this consent is being granted, the Secretary of State for Trade and Industry can, upon application by a developer, extin- The United Kingdom guish public rights of navigation through the generating Achieving planning consents for offshore wind farms in station (section 36B). This consent cannot be granted if the United Kingdom has been a relatively positive experi- the generating station will interfere with recognized sea ence for developers, with reasonably high success rates lanes essential to international navigation. The act applies and short evaluation periods. Although this section deals in the UK EEZ since amendments from the Energy Act with the specific regulatory requirements, the relevant 2004 were enacted. government bodies and the process associated with consenting offshore wind projects in the United King- Food and Environment Protection Act (FEPA) dom are discussed further in the section on government (Part II) 1985 [126] bodies in the United Kingdom in Chapter 4. This legislation aims to protect the marine ecosystem and human health and to minimize nuisance and interfer- Principally, developers can choose to consent their proj- ence to legitimate sea uses. A license under the FEPA is ects through one of two routes, each requiring confor- required for the following: mances to several laws, as depicted in Table 24. It should be noted that in some cases project specifics may • Installation of a meteorological mast and foundations require additional consents to be obtained, particularly • Installation of turbine masts and foundations for onshore works. • Depositing scour protection • Rock armoring and burial of cables at the site and connection to the shore Table 24: Alternative Consenting Routes • Associated construction works (such as junction for UK Offshore Wind Projects boxes and cable landings involving coastal defense modifications). Route 1 Route 2 Act (EA or FEPA) (TWA or FEPA) Transport and Works Act 1992 (TWA) [127] A TWA Order provides an alternate route for authorizing Electricity Act 1989— 3 n.a. Section 36 offshore wind farm projects in territorial projects only. An order can extinguish or temporarily change public rights Food and Environmental 3 3 of navigation and authorize ancillary works, and it gives Protection Act 1985 powers for compulsory acquisition of land. Transport and Works Act n.a. 3 1992 Coastal Protection Act 1949 (CPA) [128] Coast Protection Act 3 n.a. Section 34 of the CPA deals with the effects on naviga- 1949—Section 34 tional safety that the offshore project may have. The CPA Town and Country Planning (3) (3) consent will not be required where consent was given Act 1990 under Section 36 of the EA, after commencement of Electricity Act 1989— (3) n.a. Section 36B. Section 37 Water Resources Act (3) (3) Electricity Act 1989 (EA)—Section 37 [125] Where a new overhead power line is included in the n.a.= Not applicable. development of an offshore wind farm, consent is likely Note: Route 1 is applicable to projects within territorial waters or the Renewable Energy Zone. Route 2 is applicable only to projects within to be required under section 37 of the EA. When these territorial waters. 3 means that consent is required under this act. cables are connected to an offshore wind farm covered (3) means that consent may be required under this act. under section 36 of the same act, a decision on both Source: Garrad Hassan and Partners Limited. applications is usually made at the same time. Regulatory Framework 51 Water Resource Act 1991—Section 109 [129] Denmark A consent is required from the Environment Agency to The central player for the regulation of offshore wind erect a structure in, over, or under a watercourse that development in Denmark is the Danish Energy Author- is part of a main river. This will be relevant to onshore ity (DEA), as explained in the section on Denmark in cabling infrastructure if a watercourse is to be crossed to Chapter 2. access the grid connection point for the project. All other bodies involved in the consenting process in Town and Country Planning Act 1990— Denmark follow the procedure administered by the DEA, Section 90 or Section 57 [130] and all communication among the various stakeholders Planning consent may be required for onshore elements in the process is also channeled through this body. of the offshore wind farm development. Two approaches are possible: Table 25 lists the areas of interest that should be consid- ered as part of the consenting process. This list includes 1. Section 90—Planning permission is sought either as two main priority criteria: part of Section 36 application or as part of an applica- tion for an order under the Transport and Works Act 1. Field of interest, where different options exist that 1992. must be balanced with each other 2. Section 57—Planning permission is sought sepa- 2. Field of interest, where priority already exists. rately from the relevant local planning authority. Appendix A contains examples that illustrate the consent Table 25: Areas of Interest That Must Be timing process, from application to award, for a series of Addressed by the Danish Consenting projects in the United Kingdom. Process Area of interest Priority Government Bodies Sailing routes; sailing safety B The European Union Existing offshore wind farms B Extraction of raw material or future interest Legislation is generally developed by the appropriate for such A department of the European Commission, invariably Digging large stones or boulders A under some guidance of the Council of Ministers, which has the greatest influence on whether the initiative will Extraction of sand A ultimately be successful. Existing international nature protection areas B at sea Directives of interest to offshore wind include those Potential international nature protection areas under the following three broad headings: A at sea Nature; environment protection A 1. Environmental, in terms of impact 2. Climate Change Sea depth A 3. Energy Policy, in terms of security of supply. Oil and gas pipelines; subsea cables B Visual impact A The directives need to be approved by the Council of Fishing A Ministers and the European Parliament, after which the national parliaments need to formally authorize them, so Defense considerations A&B that they enter into national law. This later process can Radio links A take considerable time, but it can be as short as a year Archaeological interests A for critical legislation. Meteorological interests A The European Commission also sponsors various coordi- Ferry routes B nation, lobbying, or advisory bodies, the most important Deposits for earth; deposits for everything currently being TPWind, the European Wind Energy Tech- A (refuse, dump) nology Platform. Source: [[Source needed]] 52 Regulatory Review of Offshore Wind in Five European Countries During the consenting process, the developer must con- The Netherlands duct communications with all parties relevant to these Two main government departments are involved in the fields of interest: private, government, and local organi- offshore wind permitting process and planning [88]: zations. Finally, however, the decision and the weight- ing of the interest for the society is the responsibility of 1. The Ministry of Transport, Public Works and Water the DEA. Management (Verkeer und Waterstaat, V&W), the body responsible for the issuing permits in the North No contentious conflicts of interest among the various Sea stakeholders have emerged during the consenting pro- 2. The Ministry of Housing, Spatial Planning and the cess for the Danish offshore wind projects that have Environment (Ministerie van Volkshuisvesting, proceeded through the system to date. The government Ruimtelijke Ordening en Milieubeheer VROM), the bodies that have a statutory involvement in the consent- body responsible for the spatial planning in the Dutch ing process are given in Table 26. EEZ. Germany The Ministry of Transport, Public Works and Water Man- agement is responsible for all transport in The Neth- Tables 27 and 28 list the federal and regional authorities erlands, including on inland waters and the sea. This and institutes of relevance to offshore wind in Germany, includes coastal protection and the issuing of permits in respectively. relation to activities within the Dutch EEZ. Table 26: Government Bodies with Responsibility for Offshore Wind Energy, Denmark Name Role Danish Energy Authority Primary responsibility for regulation of offshore wind farms; responsible for www.ens.dk coordination with other government agencies, thus providing a single point of contact to the developer Within Danish Ministry of Climate and Energy (founded in 2007) Danish Maritime Authority Contributes to the safety of navigation at sea in Danish, Faroese, and http://www.frv.dk/en/index.php Greenland waters The Royal Danish Administration of Within the Danish Ministry of Defence (Forsvarsministeriet) Navigation and Hydrography Danish Environmental Protection Agency Improve protection of people, the environment, and nature http://www.mst.dk/English/ Within the Danish Ministry of the Environment Municipal and Regional County Councils Local planning Danish Forest and Nature Agency Develop, establish, and restore nature, and undertake practical management www.skovognatur.dk/International/English/ measures for wild flora and fauna. Within the Danish Ministry of the Environment. Cultural Heritage Authority Within Ministry of Culture http://www.kum.dk The Fisheries Inspection Responsible for administration, regulation, monitoring, and inspection of http://www.fd.fvm.dk/English.aspx?ID=16472 fisheries activities in Denmark Within Ministry of Food, Agriculture and Fisheries EnergiNet.dk Danish TSO and super-grid owner (400 kV) www.energinet.dk Source: Garrad Hassan and Partners Limited. Regulatory Framework 53 Table 27: Federal and Regional Government Bodies with Responsibility for Offshore Wind Energy, Germany Abbreviation Name Role BfN Bundesamt für Naturschutz www.bfn.de Federal agency for environmental protection; belongs to BMU BMU Bundesministerium für Umwelt, Naturschutz Developing RE tariffs; federal department responsible, und Reaktorsicherheit www.bmu.de among others, for RE and the environment BSH Bundesamt für Schifffahrt und Hydrographie Federal agency and leading permitting authority for www.bsh.de offshore wind energy projects UBA Umweltbundesamt Federal agency for the protection of people in the www.umweltbundesamt.de environment; belongs to BMU Ministerium für Technologie und Energie des Technology and energy department in Schleswig- Landes Schleswig-Holstein www.bmwi.de Holstein Umweltministerium Niedersachsen Lower-Saxony government environmental department www.mu.niedersachsen.de Source: Garrad Hassan and Partners Limited. Within this ministry is the North Sea Directorate (Directie routes and harbor approach routes, and pollution clean- Noordzee, DNZ). The DNZ is mandated with the gover- ups. It is responsible for implementing the Bonn agree- nance of North Sea business related to shipping, fish- ment of 1983, which relates to regional management of ing, dredging, sand mining, the ocean environment, and pollution in the North Sea. Other relevant activities led by recreation. It has a fleet of ships that are tasked with the DNZ include maintaining a major information system performing certain hydrographic surveys (for example, in the North Sea and managing seabird counts. surveys of navigational hazards), demarcation of shipping Table 28: Stakeholder Committees and Federal and Regional Development Agencies, Germany Abbreviation Name Role dena Deutsche Energie-Agentur Federal agency aims to provide know-how and www.dena.de coordinate projects in the energy sector wab Windenergie-Agentur Bremerhaven, Bremen Regional business support agency www.windenergie-agentur.de Offshore Energies Competence Network Regional business support agency Rostock e.V. Gesellschaft für Wirtschafts- und Technologieförderung www.offshore-energies.de FINO Forschungsplattformen in Nord- und Ostsee Research program of met masts in the North www.fino-offshore.de / www.fino-offshore.com and Baltic Seas Stiftung Offshore Windenergie Federal agency for the development of a pilot www.offshore-stiftung.de offshore wind farm at Alpha Ventus StAOWind Ständiger Ausschuss Offshore Windenergie Joint federal and regional committee for the der Bundesregierung mit den Küstenländern; coordination of planning activities in the sector Koordination der Genehmigungsverfahren of offshore wind energy FOWEUM Forum Offshore Windenergie und Umweltschutz Committee FoNeOWind Forum Netzanschluss Offshore Windenergie Committee MonNetz Monitoring Netzausbau Committee Source: Garrad Hassan and Partners Limited. 54 Regulatory Review of Offshore Wind in Five European Countries The Ministry of Housing, Spatial Planning and the Envi- The United Kingdom ronment sets and implements spatial planning policy for There are a number of government departments that the whole of The Netherlands. This covers both land- have a role in consenting for offshore wind projects in based planning of housing development and offshore the United Kingdom. development. The ministry “promotes a strong role for ” implying that it will leave some planning municipalities, Government Departments and the Consenting Process decisions to local authorities. • DTI and Offshore Renewables Consents Unit (ORCU) More broadly, the Dutch North Sea interests are coor- The DTI was recently disbanded and replaced with dinated by IDON Interdepartementaal Directeuren Over- the DBERR. However, the functions of the DTI with leg Noordzee, Interdepartmental Directorate for North respect to energy matters have simply been trans- Sea Policy and Governance. This grouping includes the lated to DBERR. The ORCU was created as a body following: within the DTI to serve as a focal point for offshore wind farm consent applications. It is responsible for • Ministry of Transport, Public Works and Water consents received under the Electricity Act and the Management Transport and Works Act. The unit handles applica- • Ministry of Defense tions and provides developers with a single liaison • Ministry of Economic Affairs point for questions regarding all of the consent • Ministry of Agriculture, Nature Managements and applications. Fisheries • Defra, DfT, and MCEU • Ministry of Foreign Affairs The ORCU work closely with the Marine Consents • Ministry of Housing, Spatial Planning and Environ- and Environment Unit (MCEU), which coordinates ment. requests for consent over the full range of marine Spain works in respect of those consents for which the Department for Environment, Food and Rural Affairs The national organizations involved in the administrative (Defra) and the Department for Transport (DfT) are process explained above are presented in Table 29. responsible—FEPA and CPA, respectively. Table 29: Spanish Government Bodies with Responsibility for Offshore Wind Energy Ministry Department Ministry Department Spanish English translation Responsibility Ministerio de Industria, Turismo y Comercio Ministry of Industry, Tourism and Trade Authorization of licenses and leases Dirección General de Department of Energy Política Energética y Policy and Mines Minas Ministerio de Medio Ambiente Ministry of Environment Authorization of licenses and leases Dirección General de Department for Coasts Costas Ministerio de Obras Publicas Ministry of Public Works Maritime safety, navigation, and human Dirección General de la Department of life at sea Marina Mercante Merchant Navy Autoridades Portuarias Port authorities Fishing protection and regeneration Ministerio de Agricultura, Pesca y Alimentación Ministry of Agriculture, Fisheries and Food Source: Garrad Hassan and Partners Limited. Regulatory Framework 55 Figure 23: Structure of UK Consenting Bodies Developer Application ORCU Liaison MCEU Liaison Liaison Liaison DTI/DBERR DfT Defra Electricity Act CPA FEPA Source: Garrad Hassan and Partners Limited. The relationship between these bodies in the context of • Mariculture the UK consenting process is summarized in Figure 23. • Fishing • Birds It is worth noting that projects pursuing the TWA/FEPA • Archaeology route, as described in the section on licensing and con- • Coastal processes senting in the United Kingdom, will require the involve- • Other RE ment of parliamentary agents in order to handle issues • Ports and navigation relating to the Transport and Works Act. The timeline of • Marine recreation the process itself is outlined in Table 30. • Military activities • Mineral extraction EIA and Statutory Consultees • Culture Implementation of an Environmental Impact Assessment • Cumulative impact. for an offshore wind project constitutes a significant body of work, including substantial desk study and field Consultation with stakeholder groups for each of these work. Typically, the following issues should be addressed issues should be undertaken throughout the process in some depth: following completion of the scoping phase, through the EIA and, of course, during negotiations that occur in par- • Land use allel to the evaluation of the consent application by the • Conservation licensing authorities. With a few notable exceptions, the • Landscape and seascape consenting experience in the United Kingdom has been • Dredging and disposal generally positive, provided that effective consultation • Oil and gas is undertaken. The British Wind Energy Association pro- • Submarine cables vide best-practice guidelines on this subject [119], which Table 30: Typical UK Consenting Timeline for Offshore Wind Projects Stage Description Typical duration Prepare scoping report Broad technical definition of project and potential impacts 6–12 months on environment—issue to stakeholder Prepare EIA and consent documents Detailed survey work, better defined technical description, 18–24 months mitigation measures Consultation and negotiation Post submission of application, detailed discussions with 12–18 months stakeholders and licensing authorities Determination Ministerial decision 12–36 months Source: Garrad Hassan and Partners Limited. 56 Regulatory Review of Offshore Wind in Five European Countries include details of relevant consultee organizations and the development of Europe’s electricity networks to bodies in the United Kingdom. become u Flexible—fulfilling customers’ needs while re- Other Governmental Bodies sponding to the changes and challenges ahead Outside the realm of consenting, perhaps the most u Accessible—granting connection access to all important other governmental organization is the Health network users, particularly for renewable power and Safety Executive (HSE), which is an organization with sources and high-efficiency local generation the UK Department of Work and Pensions. The primary with zero or low-carbon emissions role of the HSE is to administer and enforce the Health u Reliable—assuring and improving security and and Safety and Work Act, which is described in the sec- quality of supply, consistent with the demands tion on key applicable laws and conventions in the United of the digital age with resilience to hazards and Kingdom. This means that the HSE plays a central role uncertainties in ensuring that health and safety issues are adequately u Economic—providing best value through inno- dealt with in the design, construction, and operation of vation, efficient energy management, and “level offshore wind projects in the United Kingdom. playing field” competition and regulation. • TradeWind [38]—European R&D project focusing Another important group is the Renewables Advisory on how large numbers of wind farms, including off- Board (RAB), which is sponsored by the DTI. RAB is made shore, can be integrated into the European grid. For up of representatives from relevant government depart- example, one task has been to identify regulations in ments, the RE industry, and the unions and is intended to national market trading rules that might discriminate foster a greater understanding of all issues affecting and disproportionately against variable sources of power, affected by RE development in the United Kingdom. such as wind energy, and develop recommendations to alleviate this. Local Government • UpWind [39]—a wide-ranging R&D project that Any application for onshore works under the Town and includes Work Packages to focus on grid integration Country Planning Act 1990 [130] must be to the relevant issues at the wind turbine technology level and at district council. The application will initially be adjudicated the network level, where accurate forecasting brings by the local planning committee advised by the planning major benefits in terms of a more stable operation officers. Failed applications may be appealed to a public of the grid with large amounts of wind energy, as inquiry in front of a planning inspector whose recommen- well as an improvement to the general perception of dations would then be presented to the Minister of State wind energy within the wider electricity industry. at DBERR (formerly the DTI) for determination. Integration of large amounts of wind energy in the grid requires good cooperation between national grids Grid Access since the stochastic nature of the wind energy produc- tion means the proportion of wind energy that can be The European Union supplied to a electrical grid increases with the size and diversity of the grid. Wind energy will be a principal ben- Grid access is determined at a national level, although eficiary of improved cooperation between national elec- much of the European grid is synchronized. Hence, trical networks. power flows in a controlled, as well as uncontrolled, manner between countries. This has resulted in a gradual increase in communication and coordination between Denmark neighboring national transmission grid operators, to date There are two options for the grid connection to shore most notably in terms of Europe-wide R&D studies, from an offshore wind farm: including the following: 1. If the project is following the action plan established • SmartGrids [37], European Technology Platform— by the DEA, the grid operator will cover the cost with the group’s guiding vision being that “future to a defined farm grid connection point. Here the trans-European grids must provide all consumers system operator typically will establish a step-up with a highly reliable, cost-effective power supply, transformer. fully exploiting the use of both large centralized 2. If the project is proposed by the developer (“the generators and smaller distributed power sources open door principle”), the operator has met the cost throughout Europe. ” The group’s objective is to aid to the nearest, relevant, defined shore connection Regulatory Framework 57 point for the voltage used. Establish a step-up trans- General guidelines for the connection of wind farms to former, if needed. Considerable cost of reinforce- the transmission system have been published by VDN, ment of the grid system can be expected if a large the association of power system operators in Germany. quantity of power (probably more than 50–100 MW) Moreover, the transmission code is applicable [87]. is to be delivered into the grid. In general, the German grid already operates close to The three private offshore wind farms established to capacity in northern Germany, because the grid was date in Denmark—(Samsø [23 MW], Rønsland [17 MW], traditionally weak in that region (because the necessary and Middelgrunden [40 MW]—have followed procedure transmission grid upgrades have been delayed), and 2, and no special problems have been noted. that is where most of the onshore wind turbines have been located. A program of transmission upgrades is being undertaken, in particular to relieve bottlenecks to Germany the load centers of Rhein/Ruhr, Frankfurt, Stuttgart, and There are no payments for system usage in Germany. Munich [84]. The unprecedented capacity of the new off- The utility is responsible for grid connection, mainte- shore transmission lines means that new solutions may nance, and reinforcement. The wind farm owner pays be needed, with even novel technologies, such as gas for the transmission line up to the nearest suitable grid insulated lines, being considered. connection point. The Infrastructure Acceleration Law [61] placed that connection point for offshore wind farms Table 31 lists the available capacity at coastal substations. inside the wind farm for a limited duration. Hence, the utilities are now financially and legally responsible for The projected offshore wind turbine capacity will have a expanding the grid infrastructure to connect the offshore major impact on how the grid behaves. This is the sub- wind farm. ject of intense scrutiny. A major grid study commissioned Table 31: Eligible Substations for the Grid Connection of Offshore Wind Farms Area Substation Voltage [kV] Power [MW] Date Open North Sea Brunsbüttel (Vattenfall) 380 4,540 2020 Conneforde 380 3,200 2020 Moorriem 380 3,200 2020 Sylt Böxlund 380 125 2007 640 2010 Brunsbüttel (Vattenfall) 380 1,110 2010 Helgoland Brunsbüttel (E.ON) 380 750 2010 Borkum Maade 220 240 2007 Emden/Borßum 220 60 2007 Diele 380 1,630 2010 4,900 2020 Rügen Bentwisch 380 226 2007 611 2010 1011 2020 Rostock Lubmin 380 400 2010 700 2020 Source: [84]; [13]. 58 Regulatory Review of Offshore Wind in Five European Countries by dena that was completed in 2005 concludes that the • Intermediate voltage grid for supply to large users offshore wind farms could be integrated into the grid, and for distribution: 3–30 kV although there would be costs. The key points are [84] • Low-voltage grids for connection of retail customers as follows: and small enterprises: 230–400 V. • Assumption of 20 percent of the electricity supplied The TSO is TenneT, which operates the 380 kV and 220 from renewable sources (5 percent offshore wind kV transmission systems. Regional operators then dis- [27.9 GW], 7 .5 percent onshore wind [20.4 GW], and tribute power at 150 kV and lower. With an offshore wind 7.5 percent other renewables). target of 6 GW by 2020 and a total generating capacity • Onshore strengthening of the electricity network of around 21 GW (mainly fossil fueled plant), The Neth- would require 850 km of new high-voltage (220/380 erlands will require good control of the grid and sound kV) cables (equivalent to 5 percent of the total length interconnections with the rest of Europe, including a new nationwide), as well as 400 km of upgrading of exist- 700 MW link with Norway, NorNed, which is under con- ing lines before 2015, at a total cost of a1.1 billion. struction, and a planned interconnector with the United This will increase the cost of electricity to consum- Kingdom, BritNed, to be operational by 2010. ers by around ac0.025/kWh. • The offshore cables are likely to cost significantly To understand how The Netherlands could connect 6,000 more. MW of offshore wind, the Ministry of Economic Affairs • The UTCE safety criteria would have been violated commissioned the project, Connect 6,000 MW, between in 2003 if certain conditions had developed (strong July 2003 and May 2004. The project team included rep- winds together with specific failures in the grid or resentatives from the Ministry of Economic Affairs, and conventional power stations), although the strength- Novem carried out a survey for which ECN, KEMA, and ening of the grid code requirements for wind tur- Royal Haskoning conducted the necessary technical bines means that this is already being resolved. background studies. The final Connect 6,000 MW report • The capacity credit for 36 GW of wind turbines in [95] was finished in July 2004, and the Ministry of Eco- 2015 was calculated to be 6 percent for a 99 percent nomic Affairs has since been implementing the findings reliability level. as follows: • Between 2015 and 2020, possibly as much as another 1,000 km of new high-voltage lines will be • Likely locations for wind farms lie in a strip 25–50 needed. This will be examined in the second phase km off the coasts of the central Dutch provinces of of this study, which will extend the time horizon to South- and North-Holland. 2020/25 and which is planned for completion at the • The 380 kV substations, Maasvlakte and Beverwijk, end of 2008 [82]. are identified as the most suitable grid connection points, and there is a strong preference for bundling of cables at both points of connection. The Netherlands • Investments of around a300 million over a timescale The Netherlands has a well-developed electricity grid of 9 to 15 years are required to update the grid. with respect to security of supply and cross-border inter- • Approximately 3,000–3,500 MW could be con- connections. The system does include some aging com- nected without reinforcement of the onshore grid, ponents, and there is a distinct lack of space onshore for assuming the present levels of supply and demand more high-voltage lines and underground cables, which for power. This consists of 1,000–1,500 MW con- raises the question of how grid upgrade can be imple- nected to the 150 kV grid and about 2,000 MW con- mented in the longer term. nected to Beverwijk and Maasvlakte. • The onshore grid must be reinforced if 5,000 MW or The current grid does not provide a level playing field for more is to be connected. all power generation technologies, and more established • The Electricity Act of 1998 does not apply for con- or conventional energy sources tend to fare better. The nections, grids, grid operators, and tariffs outside technical structure of the Dutch grid is as follows: the 12-mile zone. Transparency is required concern- ing the connections that pass this zone but that do • Very high-voltage grid for transmission at the coun- not continue outside The Netherlands EEZ. try level: 380 and 220 kV • High-voltage grid for transmission at the regional The report recommends that, in the short term, individual level: 150, 110, and 50 kV wind farms provide their own cable to shore, but that in Regulatory Framework 59 the longer term, projects be able to deliver power to off- two parties, the case is referred to the regulatory body, shore connection points: “TenneT grid at sea. ” There is Ofgem, for determination. no published offshore grid code, and connections must be negotiated individually with TenneT. The issues were Uncertainty and Final Sums Liabilities examined further in a follow-up study with similar conclu- Obtaining a viable grid connection for offshore wind proj- sions [93]. ects in the United Kingdom has been a major source of difficulty and has presented a significant barrier to the acceleration of the offshore wind sector. In this context, Spain it is important to recognize that in contrast to Denmark There are no specific requirements for the grid con- and Germany, renewable energy sources have no prior- nection for offshore wind farms in Spain yet. The Royal ity for access to the grid. In addition, developers in the Decree RD1028/2007 regulates the administrative issues United Kingdom are required to pay the network operator concerning the procedures for the authorization of the an upfront security bond (known as final sums liability) construction of offshore projects, but it does not state in order for any upgrade works to commence. The prob- anything on the subject of grid connection. lem has been that the long lead time associated with such work has forced developers to attempt to secure a Thus, the same regulation for onshore wind farms is cur- grid connection at a relatively early stage in the develop- rently in force. RD 1955/2000 develops Law 54/1997 , the ment process and in many cases before the award of main electrical sector law, and regulates the different planning consents. Such securities, which have esca- activities and relationships between the different agents lated massively because of the volume of applications operating in the electricity sector. This Royal Decree from offshore wind projects, would therefore be at risk entitles Red Eléctrica (REE) to be the grid operator and if a project were to be rejected during the consenting enables it to establish the grid connection requirements process or for some technical or economic reason. The based on the principle of quality and continuity of supply reluctance of developers to take on such a risk has led to and system security. disputes over several offers. According to RD 1955/2000, REE releases the opera- An alternative option has recently been introduced by the tional procedures as “Resoluciones de la Secretaría de network operators for developers known as the “Interim Estado de Energía y Recursos Minerales. ” This format Generic User Commitment Methodology, ” whereby the gives the character of law to the correspondent Opera- annual use of system charge for the future connection is tional Requirement and, therefore, compliance with paid for the first 10 years of operation upfront, as part of these Operational Procedures is obligatory. the grid connection agreement. This route may substan- tially reduce the level of the at-risk security required to be raised by the developer for some projects. The United Kingdom Grid Connection Offshore Transmission Licensing In the United Kingdom, the basic process for obtaining a At present, the regulatory regime for offshore electricity grid connection is to submit an application to the relevant transmission is in a state of formal consultation among network operator. This may be the local distribution net- Ofgem (the UK gas and electricity regulator), the DTI, and work operator for relatively low-voltage connections or the relevant interested parties. Two options were put forward national grid for direct connection to the transmission sys- for consultation for the offshore regulatory framework— tem. In broad terms, the process is similar in either case. a “Price Control Regime” (much the same as the exist- ing onshore arrangement) and a “Merchant Approach. ” Following submission of an application to the network In March 2006 the government’s decision was to regu- operator, it is assessed (for a fee), and an agreement late the offshore system by means of the price control offer is developed on the basis of the required capacity, option. Thus, in general, the capital cost of connections the nature of the generating plant, and the status (current will be recovered by spreading the payments out over and planned future) of grid infrastructure in the region. a number of years through the application of an annual The network operator is then obliged to issue the offer to use-of-system charge. the applicant within a statutory three-month period that is normally followed by a meeting to establish whether the Another consultation that has recently concluded relates proposed agreement is satisfactory. If there is a dispute to the options for licensing transmission owner activities in relation to the offer that cannot be settled between the offshore. The two options put forward were as follows: 60 Regulatory Review of Offshore Wind in Five European Countries 1. A nonexclusive system where an offshore transmis- and to take account of the reality that unlimited and sion owner license is granted immediate connection capacity is never available. 2. A single transmission owner that would be respon- sible for connection requests. The Netherlands The government has announced that the licensing of Under the MEP program, renewable electricity genera- offshore electricity will be a nonexclusive competitive tors receive subsidies that are based on the calculated activity and that the regime will be in full operation by difference between the market price and the estimated October 2009. The scope of licensing, in terms of assets, levelized production cost for the specific type of gen- will encompass the infrastructure at 132 kV or above eration technology, with a maximum subsidy level of between the offshore generating station and the con- ac10/kWh. nection to the National Grid Electricity Transmission Plc (NGET) transmission system onshore. The renewables eligible for the MEP subsidies are wind, photovoltaics, bioelectricity (including waste incinera- This new regulatory regime is likely to have a significant tion), hydropower, and wave and tidal energy. Feed-In impact on the feasibility of offshore renewable genera- tariffariffs are reviewed annually and will decline over tion. It will essentially allow developers to convert the time as costs reduce through learning effects. The feed- high capital costs of offshore electrical assets into an in tariff is guaranteed for 10 years. To date, the various operational cost. Furthermore, being a price-controlled and frequent changes to this tariff system have not been asset, the net present value of those operating costs applied retrospectively, and no existing projects have would be significantly lower than if financed by the proj- suffered a reduction in the PPA price level. ect. Another upside may be having output metered at the offshore substation, thus avoiding line losses from The MEP is administered by the Dutch TSO, TenneT, with the shorelink cable. As a downside in the short and the Minister of Economic Affairs overseeing the expendi- medium term, the process brings uncertainty on techni- ture of MEP funds. cal specifications and program, and perhaps undue capi- tal expenditure. Spain The principal authorities responsible for managing and Power Offtake regulating the Spanish Electricity market are as follows: Denmark • OMEL, Operador del Mercado Ibérico de Energía: Its role is to balance the supply and demand of elec- Power offtake in Denmark is largely handled through the tricity through a market-based mechanism. DEA as part of the incentive scheme. In some cases, the • REE, Red Eléctrica Española: Its role is the manage- owner may choose to sell the electrical power to utili- ment and operation of the electric system in order to ties or other power suppliers through a Power Purchase coordinate generation and distribution and to guar- Agreement (PPA). antee the provision. • CNE, Comisión Nacional de Energía: It is a public The system operator has established rules where he can body that acts as a regulator of energy systems, demand the wind power plant to switch on and off in a watching over the objectivity and the transparency smooth and timely manner, which means that the wind of the energy system. turbine must have such capabilities. The grid operator can also, for a short period, demand a lower production than Wind farms have a PPA and connection agreement with the wind farm is able to yield if the security of the grid is the local distribution company, or the network operator, in danger as regulated by law [44]. REE, depending on the location of the network connec- tion and the voltage at which the wind farm is connected. For Special Regime producers, the PPA has an initial Germany five-year term, thereafter automatically renewed annu- The feed-in tariff is set by law, and a grid connection ally. Spanish financiers do not see a risk with this five- is obligatory. Thus, an agreement with the utility is not year term, since the Electricity Law ensures automatic strictly necessary. However, in practice, connection renewal. Special Regime producers have priority access agreements are still required to define operational details for generation over conventional generators. Regulatory Framework 61 The Spanish electricity market has implemented for all Specific Environmental Regulations sort of generators a system of clearing price based on supply and demand annulment. For special generators The European Union (those under RD 661/2007 application), such as offshore wind farms, a bonus is added to this clearing price, which Four main European Union Directives affect the develop- was fixed by the developer that won the bidding process ment of offshore wind projects for the five EU countries (for a specific area) just before the beginning of the mea- considered in this study. suring campaign and which will be applied along the life of the installation. The final income will be ac16.4/kWh Environmental Impact Assessment (EIA) as a maximum. European Union Directive 85/337/EEC [32] (as amended by 97/11/EC) requires that developers of offshore wind farms that are likely to have a significant effect on the The United Kingdom environment undertake an EIA. The results of this are In the United Kingdom, off-takers (or purchasers) of presented in an Environmental Statement and submitted renewably generated energy are electricity supply com- with license and consent applications. panies that are dominated by six large utilities: Cen- trica, E.ON, EDF, RWE npower, Scottish and Southern As part of the EIA process, developers are required to Energy, and Scottish Power. In addition, several specialist take into account other projects and activities to form a “green” domestic electricity suppliers also offer PPAs to Cumulative Impact Assessment. Included in this should wind farm owners. be the following: For wind farms in the United Kingdom, there are typically • Existing completed projects two types of PPAs: • Approved but incomplete projects • Ongoing activities (such as dredging) 1. Purchase of “brown” electricity only (in the electric- • Plans or projects for which an application has been ity market; brown refers to the source of the major- made ity of this power) • Plans and projects which are “reasonably fore- 2. Purchase of “brown” electricity, ROCs (Renewables seeable.” Obligation Certificates—UK tradable “green certifi- cates”), and LECs (Climate Change Levy Exemption Particular attention should be paid to cumulative visual Certificates—UK tax incentive) (combined price). impact. Usually these are agreed for a fixed (per MWh) rate over Strategic Environmental Assessment Directive a fixed future period. Since both the brown power and EU Directive 2001/42/EU [34] requires national govern- ROC components are subject to fluctuating markets, ments to examine the broad environmental impact of option 2 can present a means of mitigating revenue risks, planned national or regional programs for specific sec- thus improving conditions for financing. In addition, some tors, including energy. This may be addressed through the upside sharing can be built into option 2 by splitting the commissioning (by the government) of Strategic Environ- ROC-buyout recycle payments at the end of each compli- mental Assessments for a particular region before formal ance period (more information on this mechanism is pro- adoption of a national program for the development of vided in the section on the United Kingdom in Chapter offshore wind. 3). The duration of the PPA will also affect conditions for financing. To date, they have ranged from three to five Habitats and Birds Directives years for offshore wind projects. Under the EU Habitats Directive 92/43/EEC [33], any proj- ect that is likely to have a significant effect on a Special The majority of PPAs for offshore wind farms in the United Area of Conservation will be subject to an appropriate Kingdom have been between the project company and a assessment of its implications on the site’s conserva- utility equity owner (presumably with a Renewables Obli- tion objectives. In addition, under the EU Birds Directive gation to fulfill). 79/409/EEC [31], any project falling within zones defined by member states as a Special Protection Area, known as the Natura 2000 network, will be subject to protection measures defined by the directive. 62 Regulatory Review of Offshore Wind in Five European Countries Regional Agreements May 2003 by an extraordinary meeting of the parties In addition, a number of regional agreements aim to pro- to the Espoo Convention. [17]. tect the environment, such as the following [12]: • Bonn Agreement (1983): Agreement for cooperation in dealing with pollution of the North Sea by oil and • OSPAR Convention (1992), Convention for the Pro- other harmful substances [14]. tection of the Marine Environment of the North-East Atlantic, a combination of two existing conventions: the Oslo Convention for the Prevention of Marine Denmark Pollution by Dumping from Ships and Aircraft (1972), The main environmental regulations governing offshore and the Paris Convention for the Prevention of wind in Denmark are described in the section on key Marine Pollution from Land-Based Sources (1974). applicable laws and conventions in Chapter 4. It entered into force in March 1998. It covers three main areas of pollution in the first three annexes: In contrast to many other countries, defense issues do (1)  from land-based sources, (2)  dumping or incin- not usually present a planning obstacle in Denmark, eration, and (3)  from offshore sources. The final since the work on planning for the future offshore wind two annexes cover assessment of the quality of the farms [41] has taken defense interests into account. As marine environment, and protection and conserva- presented in Table 27 , defense interests can be both pri- tion of the ecosystems and biological diversity [18]. ority A or B, and until now there have been no significant • Convention on the Protection of the Marine Environ- conflicts. ment of the Baltic Sea Area (1992): The Helsinki Con- vention has been in force since January 17 , 2000, The fishermen are a group for which compensation must and it succeeded the 1974 Helsinki Convention. It be negotiated. There are no standard rules, but usually was adopted by Denmark, Estonia, the European the calculated loss based on documentation for landed Community, Finland, Germany, Latvia, Lithuania, fish is used as a basis for negotiation. Problems have Poland, Russia, and Sweden. Perhaps because of been observed in the North Sea, where international the sensitivity of shallow, enclosed seas such as groups of fishermen have been causing problems (for the Baltic to pollution and the generally progressive example, removing buoys and blocking transport to site) nature of Scandinavian countries, the Helsinki Con- as a way to protest not having received any compensa- vention is relatively stringent. For example, the 1974 tion. The official lines of negotiation with the fishermen convention already banned the dumping of waste at are through the national organization. sea [16]. • Ramsar (1971), Convention on Wetlands of Interna- Testing and monitoring programs for specific environ- tional Importance Especially as Waterfowl Habitat, international cooperation for the conservation and mental issues can be imposed by law, as described in wise use of wetlands, which is defined as marsh, the section on licensing and consenting in Denmark in fen, peat land, or water, whether natural or artificial, Chapter 4. permanent or temporary, with water that is static or flowing, fresh, brackish or salty, including areas of Germany marine water up to 6 m deep at low tide [19]. • Espoo (1991), Convention on Environmental Impact The Seeanlagenverordnung regulates the development, Assessment in a Transboundary Context: Obligates construction, and operation of offshore wind projects. parties to assess the environmental impact of cer- The Standards for Environmental Impact Assessments tain activities at an early stage of planning and lays of Offshore Wind Turbines in the Marine Environment down the obligations to notify and consult each [77] describe the environmental studies to be performed other on all major projects likely to have a significant in the planning stage and the measures during the adverse environmental impact across boundaries. construction, and reference [78] describes the turbine It was adopted in 1991 and entered into force on requirements. September 10, 1997 [15]. The convention was later supplemented by the Kiev Protocol on Strategic Based on this, the BSH will issue a permit that may Environmental Assessment¸ which was adopted in include restrictions on operation of the wind farm. Regulatory Framework 63 The Netherlands typically only extend to the mean low water level at the shoreline, but potentially an adjacent or nearby offshore Under the Wbr, an Environmental Impact Statement wind project could be considered to have an impact (EIS) must be submitted, together with the request for a on the SSSI. In this instance, the relevant consenting building permit. The procedure starts when the applicant authority is required to consult statutory environmental submits an inception memorandum (notification of intent conservation bodies (Natural England or the Countryside or starting note; startnotie) for the EIS to the Directorate Council for Wales) and to take their views into account. of Water Management North Sea (DNZ). If successful, the process ends with the Ministry of Transport, Public Other Protected Areas Works and Water Management awarding exclusivity and In addition to SSSIs, there are several other national a Public Works Act (PWA) permit. designations for areas in the United Kingdom that afford protection that might jeopardize the development of an Spain offshore wind farm: An Environment Statement (to document the results • Marine nature reserves of the Environmental Impact Assessment) must be • National nature reserves submitted together with the licensing applications. The • Heritage coasts EIA should be carried out according to Royal Decree • Areas of outstanding natural beauty 1302/1986, which was developed according to the Euro- • National parks. pean Directive 85/377/CEE. The EIA will include the fol- • Landscape and seascape lowing information: In the United Kingdom, the potential visual impact of • Brief description of the project on the use of the offshore wind farms is a sensitive issue, and develop- ground and other natural sources.Estimation of the ers have been careful to address this in conjunction with quantity and sort of resulting wastes and emissions statutory consultees. The Countryside Council for Wales • Evaluation of predictable direct and indirect impacts has produced useful guidelines on this issue [120]. on population, flora, fauna, air, water, ground, climate factors, landscape, and historic-artistic and archaeo- COWRIE logical heritage In order to address scientific uncertainties over the poten- • Considered measures to reduce, eliminate, and tial impact of offshore wind farms on the environment, make up for significant environmental harm the UK government set up a company, Collaborative • Summary of the study and conclusions Offshore Wind Research into the Environment (COW- • Environmental vigilance program. RIE), to undertake and fund the necessary fundamental research required to fill such gaps in understanding. The The United Kingdom intention was that this would aid the consenting process in the United Kingdom by providing generic findings on Sites of Special Scientific Interest environmental impacts and how best to assess them Sites of Special Scientific Interest (SSSIs) are required during the EIA process. The Board of COWRIE is drawn to be conserved and enhanced under the Wildlife and from the DTI, Crown Estate, and the British Wind Energy Countryside Act 1981 (as amended) [131]. These areas Association (BWEA). 5 Drivers, Barriers, and Experiences This chapter contains an overview of the different coun- specific scheme, and therefore cooperation between tries’ experiences with offshore wind and an analysis developers and local people has a long tradition, also in with respect to factors driving offshore wind develop- offshore wind. Community participation is also common- ment and regulatory barriers that exist. place through part ownership of some turbines. This has been achieved for offshore projects at Middelgrunden and Samsø. Denmark The development of a new offshore wind project off the Drivers county of Hvidovre is following the same route with a strong local participation in the planning and the own- The main driver for offshore wind in Denmark is the ership. One-third of the total project is expected to positive stance of the government, as illustrated by the be owned by private people; citizens of Hvidovre are recent announcements on the siting of future offshore expected to have a preferential option to buy shares dur- wind farms [42] within the framework of a national stra- ing the first half year. tegic energy plan. The very large expenses connected with grid reinforcement will almost make it prohibitive It is difficult to imagine that any single developer can to start a project independent of tender announcements “press” the timetable for development of the projects from the DEA. Therefore, independent development of in the national Action Plan, since this is the subject of nonsanctioned sites is considered unlikely. political debate. This can best be illustrated by the ongo- ing discussion between the government parties and the This level of political support has been achieved partly situation in the Parliament where the opposition is blam- through strong industry associations that have success- ing the government for not fulfilling the targets in the old fully lobbied the government. The Danish Turbine Owners Action Plan. Association (Dansk Vindmølleforening) is one of the two main lobbying groups with more than 80 percent of the The strong wind turbine manufacturing industry in Den- turbine operators, including all large power plant opera- mark can also be seen as something of a driver for the tors, as members. The other group lobbying the political development of a viable offshore wind market. Although system is the Danish Wind Industry Association. the vast majority of revenue is derived from exports, it can be argued that there is an incentive for the Danish In addition to industry lobbying and coordination, public administration to be taking the lead in an international acceptance of wind turbines is at a very high level in Den- sense to push forward the commercialization of offshore mark (more than 80 percent positive during many years wind technology by continuing to foster a successful of polls). Local resistance can sometimes appear to a domestic market. 65 66 Regulatory Review of Offshore Wind in Five European Countries Barriers Lesson Learned Denmark pioneered offshore wind energy in the 1990s Perhaps the most important barrier to the fast develop- and has the most mature regulatory regime for this tech- ment of the offshore wind market in Denmark is that asso- nology in the world. A major setback in 2002 because ciated with political uncertainty. The influential industrial of a change in government has since been rectified, and group Dansk Industri represents energy-intensive indus- plans are now in place for delivery of a continued pipeline tries (such as sugar and cement) and has been lobbying of projects. In summary, the following lessons can be the government to take a more reluctant attitude toward learned from this experience: wind energy, which it sees as an expensive option. The main argument from the organization is that the mem- • Strategic planning bers are not able to compete internationally if more RE is The planning work carried out by the Danish authori- introduced. Ironically, wind energy represents one of the ties in the 1990s can be described as the forerunner largest single export industries today, generating approxi- of the Strategic Environmental Assessment, which mately US$5 billion annually in export revenues. is now enshrined in EU law. This long-term coor- dinated planning approach has continued with the The government is also conflicted by the attitude of its release of planned future sites for exploitation over minority coalition partner, which takes a strongly anti- the next 20 years. wind stance. This conflict is in contrast to the broad • A coordinated approach and the one-stop-shop political consensus on energy policy that Denmark has The single most important lesson from offshore enjoyed historically. Another factor that will limit both wind experience in Denmark is the value of a coor- the pace and ultimate extent of offshore wind employ- dinated approach to the regulatory regime, which ment in Denmark is the size of the electricity supply mar- should work in unison with a well-organized indus- ket. Denmark has a population of just 5.5 million and is try and a (generally) supportive and involved local already a net exporter of electricity. With a long-term tar- population [51]. The relative simplicity and transpar- get of 4 GW of offshore wind by 2030, an average build ency of the consenting system and its administra- rate of 200 MW per year can be expected, which while tion by a single governmental agency (which also significant perhaps does not match the ultimate potential has broader responsibilities for the development of of larger European national markets. offshore wind) has allowed Denmark to pioneer off- shore wind and continue deployment with a viable, A Simple, Mature Framework? if limited, pipeline of future projects. • Does one size fit all? The one-stop-shop procedure with the DEA as a central It should be noted that the Danish approach to off- coordinating body has shown good results and is func- shore wind is perhaps not transferrable to all mar- tioning well. The detailed upfront work delivered in the kets, given country specifics. The generating utilities national Action Plans has addressed the long-term strate- and electrical network operator have had and con- gic planning required for a sustainable market. tinue to have strong Danish regional or national iden- tities. Hence, they have cooperated well to meet The Danish market has a strategic plan in place for off- national objectives. It could be argued that countries shore wind and has had largely positive regulatory expe- with more competitive national electricity markets riences from the projects deployed to date. In this sense, may require somewhat more complex systems the national market can perhaps be seen as the most to serve the needs of government, business, and mature regulatory regime for offshore wind in Europe and consumers. by virtue of the lack of activity elsewhere in the world. Political Risks Germany The cancellation of four planned offshore wind projects Drivers in 2002 following a change of administration demon- strates that even Denmark is subject to market instability The key drivers propelling offshore wind energy for- because of political factors. However, that was precipi- ward are two concerns shared universally, first, climate tated by a change of government from a liberal pro-wind change, and, second, scarcity and security of energy sup- to a center-right administration. Any future change in the ply. Currently, it is impossible to imagine a realistic future opposite direction would be likely just to strengthen the scenario where these concerns do not remain important. restabilized national plans for offshore wind. Hence, offshore wind energy would seem to be based Drivers, Barriers, and Experiences 67 on a sound foundation in Germany. Onshore wind energy immediate benefits to the country in terms of increased has already reduced the country’s CO2 emissions and, exports. with the scope for significant further expansion on land severely limited, alternatives need to be found. In spite Onshore wind energy is seen as a success, although of offshore wind’s high costs, it appears to be the cheap- important concerns about visual impact must be con- est available and viable option for generating low-carbon sidered and have been balanced against the benefits electricity, the alternatives being inappropriate for the fol- of wind energy usage. The wind energy industry has its lowing reasons: own momentum today. It is a large and powerful lobby and appears to be successful at ensuring that changes in • Nuclear power has not recovered from the negative legislation are proportionate and timely. impact on public opinion caused by the Chernobyl disaster and, although the early closure of existing nuclear plants may well be postponed, new con- Barriers struction appears to be out of the question because Clearly, the delays in the takeoff of offshore wind energy of public opinion, uncertainty of cost, issues of dis- in Germany indicate that there have been substantial posal, and risk of terrorism. barriers. Pre-eminent of these is that the existing tariff • PV does have a high profile and high installation rates may not be sufficient to compensate for the consider- in Germany, as well as significant political and public able costs and risks of developing offshore wind farms. support. However, costs remain high and hence, the It has been difficult for the German government to esti- capacity that can be realistically implemented in the mate accurately the financial support needed, especially medium term is limited. when at the same time there is the opposing desire to • Biomass requires exclusive use of large areas of reduce the cost of wind energy. The approach chosen has land. Competition for the feedstock usually accom- been to gradually increase the support mechanisms until panies it: for food in some cases, and for heating construction starts in earnest, although it is not yet clear of individual homes, as well as larger buildings, in whether the most recent improvements mean that that others. Many feedstocks have a greater value if point has been reached, and the EEG tariffs may need to converted into liquid fuel for transport, and biomass be modified yet again. electricity generation is unlikely to be able to expand to the point where all other technologies are pushed A second important barrier is the lack of suitably large out. proven offshore wind turbines. The deep waters in the • As in most countries, the best sites for hydropower German offshore sector mean that wind farms and also have already been developed, and major future wind turbines need to be larger than off Denmark, the expansion would involve environmental impacts that United Kingdom, or The Netherlands, and 5 MW is prob- are no longer acceptable. ably the minimum size necessary. To date, of the German manufacturers, only Siemens (via its Danish subsidiary) This leaves offshore wind, with technology proven to has gained substantial offshore wind energy experience, be viable and competitive onshore and strong German while REpower has installed 5 MW wind turbines in the industrial capability, ensuring that the benefits of this deepest waters to date, the two machines at the Bea- policy will remain substantially in Germany. trice project in 45 m seas off Scotland. Enercon installed a single wind turbine close to shore near its base in In the medium term, nuclear, PV, and solar thermal northern Germany, although it has shown less interest could re-emerge as contenders. However, offshore wind in the market since and has pulled out of the Alpha Ven- should be sufficiently established by then to be able to tus test field. This Alpha Ventus project will still allow compete effectively. REpower and MultiBrid to demonstrate their technology at a remote and exposed site, and both companies have announced they will be supplying 5 MW wind turbines German Leadership to first-phase developments off Belgium and France, Germany is the largest country in Western Europe and respectively. It must be a concern that five of the six larg- is relatively wealthy, which has enabled it to take an est wind turbine manufacturers in the world13 [2] will test active role in the development of international environ- their wind turbines at Alpha Ventus, that they can offer a mental legislation, both at a European as well as a global 5 MW wind turbine, or that they even have announced level. Germany’s advanced manufacturing capabilities the imminent development of one. Given their recent mean that advanced technological solutions, such as wind energy as opposed to reducing consumption, bring 13. The exception being Suzlon through its ownership of REpower. 68 Regulatory Review of Offshore Wind in Five European Countries renewed enthusiasm for offshore wind farms, it would and allowed the development of widespread offshore seem highly likely that Siemens would also supply a project development capability and knowledge. The lack 5 MW wind turbine in the medium term, although the of transparency earlier and the presence in Germany of technology development and trialing will require several large numbers of small developers have resulted in lim- years. The other major manufacturers have not given any ited foreign involvement. Indeed, there has been very indications that they may change their currently disinter- limited foreign involvement in German onshore projects ested stance. until recently. Experience with the first large offshore wind farms has been challenging, in particular at Horns Rev. Rapid Lessons Learned expansion of manufacturing capacity will involve major Two important points shed light on how the German risks. There have been several high-profile and extremely offshore experience could have been and could be expensive retrofits to offshore wind farms, resulting in improved: heavy losses for the wind turbine suppliers. Similar expe- riences in the first German projects to be constructed • Development has been slow. Why was this? will delay the expansion of offshore wind in the country • Offshore project sites were allocated in an unstruc- by several years. tured manner. Were the sites awarded to developers that were most capable of realizing the projects? The way that the German on-land market developed in general meant that there was a lack of large and expe- Development has been very slow. If project construction rienced companies with the financial ability to develop were going to start only the turn of the decade, was it the first-phase offshore wind farm: 80 wind turbines, 400 really efficient that sites were allocated at the beginning MW, and an investment of around a1  billion. The site of the decade? The German offshore seabed is relatively claim and permit application procedures are relatively low small in comparison with the targets for offshore wind cost, and the small German wind developers were able to energy. Small developers have been able to make claims fund the work through to receiving the permits, although for large expanses of seabed at relatively low cost, they generally avoided the major costs of geotechnical although the relative risks to the capital base of such surveys and met masts by restricting themselves to small companies could be high. It must be admitted that lower-cost geological surveys and waiting for the gov- there are no perfect solutions to this challenge. In other ernment to finance the FINO met masts. The existing countries where moratoriums have been put in place or developers need to sell at least part of the projects to large deposits required, developer unhappiness has been a financially stronger partner in order to build the wind equally prevalent. farms, and DONG, Airtricity, and E.ON indeed ended up buying projects. No doubt there are differences between As in most countries, the size of the potential rewards how the small developers and the potential investors in Germany caused applicants to request site licenses value these projects. and construction permits before the regulatory regime was in place. The original regulatory regime was not suit- Grid connection to shore has also been a challenge, first able for potentially high-cost and high-value projects, because of the cost and second because of the com- such as wind farms, and the majority of permits were plexity of permitting, when a large number of projects lodged before the regulatory regime could be adapted. simultaneously need new connections to the sufficiently In addition, an unstructured permitting process allowed strong grid points over 50 km inland. The chosen solution small, agile businesses to claim the sites. To some has been for the utilities to supply the grid connection extent, this can be seen as a false early start to the sec- through to the offshore substation, although this results tor deployment. in a split of responsibilities and interests. Will the utilities provide connections of sufficient quality and will they do The involvement of foreign companies may bring in capa- so early enough? It may be wise for project developers to bilities and experiences missing among the home com- pursue the permitting process themselves and then pass panies, in addition to the obvious expansion in access to the permits over the utility to construct. investment capital and competition between developers. This can stimulate progress, with DONG’s contribution to In general, the German regulatory system has encour- the United Kingdom being a good example. aged high levels of activity, but with limited progress, Drivers, Barriers, and Experiences 69 The Netherlands Does This Work for The Netherlands? Historically, the support system for renewable electricity Drivers in The Netherlands has been a confusing mix of different The Netherlands is a trading nation, with Rotterdam in schemes that have changed frequently. Hence, investors particular playing a prominent role in European and world cannot be sure at the inception of a project what type of trade, including that of oil and gas; The Netherlands is support mechanism will be available, if any, once permits one of Europe’s three largest producers of natural gas have been obtained and the project can be constructed. [88]. At the same time, a large part of the country is on The previous REB scheme, an ecotax applied to nonre- land reclaimed from the sea and hence is below sea newable energy sources, stimulated significant demand level. This creates internal conflicts over how to deal for renewables, but unfortunately not an expansion of with climate change, since the country disproportion- indigenous supply. For example, by 2002, 1 million Dutch ately benefits from extracting and trading fossil fuels in households were buying green electricity, the majority of the short term while being disproportionately sensitive which was being produced cheaply in neighboring coun- to the effects of global warming in the longer term. tries and then imported. The Netherlands did not take on a particularly challeng- Since the introduction of the MEP scheme in 2003, ing Kyoto target, requiring only a 6 percent reduction in RE generated within The Netherlands has increased. GHG emissions for the 2008–12 period compared with Together with improvements to the planning regulations, 1990 levels. The primary focus to achieve this has been a rapid expansion in offshore wind project activity has energy efficiency, and much has been done to reduce resulted, with submissions for 20–25 GW of offshore energy consumption in buildings. CHP , district heating, projects delivered to the ministries. However, it should and building-integrated PV are well supported, and there be noted that to date only two major offshore wind farms are significant installed capacities of these technolo- have been approved. They are under construction, and gies. Meanwhile, The Netherlands has limited expanses both received consent via alternative routes. Hence, the of undeveloped land, which consequently are probably current procedures have not been demonstrated to be more highly valued than elsewhere, which creates chal- effective. lenges for the development of onshore wind. The strengths of the Dutch system can be quantified as Consequently, offshore wind presents the best large- follows: scale RE development potential for The Netherlands. This is further reinforced by the maritime history of the • A mixture of tax reduction and a guaranteed pre- country and its large and active oil and gas industry bring- mium for wind power should encourage both indig- ing relevant expertise. enous demand and supply. • The majority of the subsidies are based on produc- tion; hence, only successful projects are rewarded Barriers fully. • The MEP system consists of the relatively simple The grid capacity will pose a barrier to offshore wind if feed-in tariff as opposed to the complications of pre- more than 3,500 MW are to be connected. Plans are in vious schemes in The Netherlands and elsewhere. place to reinforce the grid, but not at a pace that could • The Wbr appears to provide a single set of proce- encourage large-scale rapid development. dures to be followed to gain all the necessary per- mits to build. The MEP tariff for offshore wind is not particularly gener- ous. This appears to be a deliberate policy to attract only The key concerns relate to the following: those schemes that can be made commercially viable in the shorter term rather than subsidize the industry for • Whether a 10-year premium will be sufficient, its own sake. It is notable that only nearshore projects since projects may have to be amortized over this that can be expected to have lower capital expenditures relatively short period; 15 to 20 years may be more and O&M are currently moving forward. There have also appropriate. been and continue to be numerous changes to the MEP • Adjustment of the MEP tariffs on an annual basis, and related government policy, at times of a significant breeding uncertainty; the government also has a nature, which has unsettled investors and developers. 70 Regulatory Review of Offshore Wind in Five European Countries recent history of summarily suspending the support The government goals for sourcing increasing proportions mechanism, as happened in both mid-2005 and mid- of total energy from renewables in order to combat cli- 2006. mate change can also be considered a driver. Other new • Lack of transparency in how competition between renewable technologies (if hydropower is not classed as a applications will be resolved; this causes further new RE), with the important exception of onshore wind, uncertainty and could have been resolved through make only a limited contribution to electricity generation bidding rounds. currently. Offshore wind energy has the opportunity to • The need for grid reinforcement for a total offshore expand rapidly once suitable technologies and a manu- wind capacity over 3,500 MW. facturing capability have been developed. The strength and ambitions of the major Spanish RE Lessons Learned developers can also be seen as drivers. They are show- The first key message is that regulatory uncertainty will ing preliminary interest in wind energy and offshore wind stifle development, and the number of changes in the outside Spain and can be expected to push offshore past years of the subsidy schemes and permitting poli- wind projects forward within Spain as soon as attractive cies means that offshore wind power has not been as opportunities present themselves. successful in The Netherlands as it could have been. Any government support scheme needs to follow the The tariff established by the government on initial inspec- principles of being clear, free from unnecessary change, tion appears to be sufficiently high to encourage devel- and sufficiently long term to attract investors. In The opment. However, there is a competitive element that Netherlands, although the first offshore wind farms are should ensure that financial support is spent effectively under construction, regulatory uncertainty continues to and efficiently, although it carries the risk that successful exist, discouraging private parties from investing in off- bidders will have underbid and will be unable to complete shore wind. the projects. The requirement to pay a guarantee in two stages means that high-risk strategies will carry a signifi- The second key message relates to having a more defined cant cost to the bidder. spatial planning process up front to ensure that permit applications do not overlap. This causes uncertainty for Barriers the developers, generates duplicate work for the permit- ting authorities, and delays the approval processes. The current lack of experience and infrastructure is a sig- nificant barrier. The purpose of the extended timescale Finally, the inclusion of timely and appropriate grid stud- through the permitting process and to construction may ies and transparency in the timing and allocation of finan- have been to allow this to be rectified. cial and permitting responsibilities is also important, as are the development and publication of grid codes and The number of suitable sites for bottom-mounted off- standards applicable to offshore wind. shore wind turbines is very limited off the Spanish coast because of Spain’s position at the edge of the continen- tal shelf. Significant potential exists for floating offshore Spain wind once a reliable and economically feasible technol- ogy has been demonstrated. Drivers There has been considerable resistance to the offshore The fact that specific legislation for the permitting of off- wind farms proposed to date, in particular from the fish- shore wind energy and for stipulating a specific feed-in ing industry, tourism, and environmental interest groups. tariff has been published creates an initial level of con- With tourism being extremely important and prevalent fidence in the future of the industry. This is likely to be in Spain, it is perhaps not surprising that many suitable a highly effective driver for encouraging exploitation sites are also popular tourist destinations. In addition, the of offshore wind energy in Spain, as recent announce- rapid descent of the seabed close to shore means that ments have demonstrated. Spanish government policy projects need to be sited extremely close to the coast, on RE, at both national and regional levels, has tended to exacerbating this situation. be highly encouraging and stable, and the expectation is that this will also be the case for offshore wind. Drivers, Barriers, and Experiences 71 Experience Significant support has been provided to wave and tidal energy technologies with the intention of commercial- Not surprisingly, Spanish companies have had very little ization for significant deployment beyond 2015. Little experience with offshore wind to date, although this can scope exists for the significant expansion of hydropower be expected to change, in part because of Iberdrola’s in the United Kingdom and the lack of socially, environ- purchase of Scottish Power, together with its portfolio of mentally, and economically acceptable sites for onshore offshore wind farms. wind will ultimately limit deployment—especially in the 2010–15 timeframe. These factors in combination sug- In addition, if Spanish turbine manufacturers develop gest that the only means of achieving the 2015 national offshore wind turbines, a demonstration offshore wind target is through the large-scale deployment of offshore project would allow validation and an opportunity to gain wind energy. The slow initial progress on this front in experience in operating offshore. the United Kingdom primarily because of poor econom- ics has been addressed through the proposed revision to the RO with increased support for offshore wind. Lat- The United Kingdom terly, the announcement of plans for 25 GW of further offshore wind site awards in a new concessionary round Government Policy has clarified the level of ambition of the current govern- The most important drivers for the development of off- ment with respect to offshore wind. shore wind in the United Kingdom are political, which have led to strong governmental support. Principally Early-Mover Advantage they are associated with climate change and security of supply. It is these issues that have stimulated the UK A subsidiary driver for offshore wind in the United King- government to pursue a policy of support for the sub- dom is the skills and knowledge advantages that com- stantial deployment of renewable energies. This support panies may obtain through the experience gained in the has been enacted in the Renewables Obligation—the development, construction, and operation of early proj- mechanism that is designed to meet national targets on ects. This is particularly important if there is a clear indi- RE through a market-based approach. Security of supply cation that there will be a substantial, viable market in as an issue has come to the fore, with much of the UK the medium to long term. This factor was perhaps crucial nuclear capacity coming offline by 2015 and reliance on in the construction of the first two Round 1 projects— gas imports increasing. North Hoyle and Scroby Sands. More significant is the pre-eminence of the Danish utility DONG as a developer New nuclear generation remains an option for the UK in the UK offshore market, having gained substantial government as a means to fulfill national and international early offshore wind experience in Denmark. In general, commitments on carbon emissions and energy security. it could be argued that, in the context of offshore wind, The 2007 Energy White Paper indicates a willingness to UK utilities are to a varying degree “behind the learning pursue this to some degree. However, major obstacles curve.” Strong evidence now suggests that this issue relating to public acceptance and economics or financing is being addressed, with an acceleration of utility-led remain. In addition, any new build nuclear program in the deployment expected for the period 2007–10. coming decade is only likely to offset reduced generation through the decommissioning of existing nuclear plants Grid Access and Costs that are coming to the end of their design life. Recently (June 2008), very positive statements were made by Connection to the grid has been a major barrier to the senior figures, including the prime minister, about the development of the offshore industry in the United King- future of nuclear in the United Kingdom, and the devel- dom in two ways. First, as described in the section on opment of new nuclear power plants now seems to be grid access in the United Kingdom in Chapter 4, access a certainty. to the grid has necessitated negotiations with system operators who have no obligation to provide priority RE technologies, other than wind energy and existing access to renewables and who have imposed the pay- hydropower installations, are unlikely to make a sub- ment of large securities as a condition of any offer to stantial contribution toward the national target of 15.4 cover the cost of upgrading works in the event that the percent renewable electricity supply by 2015, because project is not built. Second, in contrast to Denmark and of their immaturity or lack of economic viability, or both. Germany, the high cost of connecting the wind farm to 72 Regulatory Review of Offshore Wind in Five European Countries the grid is currently borne by the project company. This should always be sufficient to achieve the majority of the significant additional capital cost has contributed to poor increasing RE target set by the RO. The barriers faced by economics for many projects. developers of onshore projects in the United Kingdom are increasing because of a lack of site and grid connec- These grid-related issues are currently being addressed tion availability (in the windiest regions). Although this is to some degree by the UK government and the electricity likely to mean that incentives will increase as the gap industry regulator, Ofgem. The most important outcome between the annual obligation and the achieved level of this is likely to be the licensing of third parties to own widens, they are unlikely to increase enough to offset the and operate offshore electricity transmission assets— cost differential between energy generated from onshore charging projects on a use-of-system basis. From the and offshore wind farms. This will lead to high returns for developer’s perspective, this will effectively convert onshore wind farm owners and limited growth of the off- a capital expenditure into an operational expenditure, shore wind sector in the United Kingdom. thereby providing the potential for some improvement in project economics. The UK government is attempting to address this issue through amendment of the RO to provide technology- differentiated support, from 2009 at the earliest. This will Consenting Success mean that the RO will provide an additional 50 percent Perhaps the most successful aspect of the regulatory of support for energy generated at offshore wind farms regime in the United Kingdom has been the success rate compared with the energy generated onshore. Some for consent applications and the associated resolution of commentators have suggested that the success or fail- stakeholder conflicts during this process. This success ure of the RO on a technology-differentiated basis will be has come in many ways in spite of the laws regulating highly sensitive to the exact value of the arbitrary mul- the construction of offshore wind that are relatively com- tiples applied. plex and in some cases outdated. Although this is being addressed by the Marine Bill, which is likely to result in In general terms, the RO has also been criticized for trans- a more streamlined legal framework, the interim solution ferring risk to the private sector through the perceived of creating a coordinating body for applications (ORCU) political risk associated with time-variable levels of sup- appears to have been successful. As well as a good suc- port. It can be argued that this has affected the value of cess rate, the vast majority of offshore wind consent PPA contracts, as well as the lending profile financiers applications reached determination within 18 months of ascribe to RE projects in the United Kingdom. submission. The lessons learned from regulatory experience in the United Kingdom can be summarized as follows: Technology Blind Support—The Problem with the RO • Streamline consenting. The principal framework for encouraging offshore wind The creation of a single government body for deal- in the United Kingdom is what is used for all RE technolo- ing with consents for all offshore RE projects in the gies—the Renewables Obligation (RO). (More details on United Kingdom has contributed to both the rela- this are provided in the section on the United Kingdom in tively high success rates and short evaluation peri- Chapter 3.) In its current form, the RO provides undiffer- ods achieved to date. Further streamlining of the entiated support for all renewables in the form of a trad- consenting process, including the consideration of able certificate system with an increasing annual target. strategic national issues, through the forthcoming The strength of this system is that the level of incentive Marine Bill, is likely to simplify the process further. is directly proportional to the target deficit ; therefore, Where existing legislation is inappropriate to facili- the effective level of support is continually adjusted tate renewables deployment in line with govern- depending on the target in each year and the generation ment policy, industry should lobby to amend such level. This system will inherently favor the cheapest RE legislation and, where possible, simplify consenting to produce—currently onshore wind. procedures. • Align grid regulation with strategic energy policy. In some ways, this undifferentiated support can be seen The regulation of electrical grid infrastructure and as an advantage, since it is most efficient to deploy the energy transfer in the United Kingdom is controlled cheapest technology. However, for the system to be suc- by the independent body, Ofgem. Disputes between cessful, the deployment rate of the cheapest technology offshore wind project developers and network Drivers, Barriers, and Experiences 73 operators are arbitrated by this body whose primary offshore during 2007; Korea, where plans for a demon- objective is to protect the rights of consumers and strator at Jeju are well advanced; and Taiwan (China), not to help the government achieve strategic energy which recently announced a competitive tender for six targets. It is argued that this incongruity is not for sites for offshore wind farms [138]. the long-term good of anyone and has helped to stall offshore wind deployment in the United Kingdom. Alignment of grid regulation and government energy Belgium objectives would help to accelerate the deployment Belgium is an informative case and hence useful to study of offshore wind. in greater detail, even if the market is likely to remain lim- • Deal with differences in cost and deployment ited in size. Initially, Belgium suffered from a divergence potential when incentivizing renewables. between the excellent enthusiasm of the project devel- As described above, the incentive system in the opers and the poorer commitment and capability of the United Kingdom (the Renewables Obligation) is to regulatory regime and authorities. This is exemplified in some degree flawed, since the targets will sub- the extreme case of a Belgian developer that believed it stantially exceed the deployment capacity of the had all the necessary permits and proceeded tp place cheapest RE technology while not adapting quickly a purchase order with the turbine suppliers only to dis- or severely enough to stimulate growth in the next cover that the authorities had made an error and hence cheapest technology. This is now being addressed the permission was invalid. through reform of the RO, although the results of this reform will not be seen for many years. Whether When the first projects were developed in 1999, there a feed-in tariff approach (as favored in all four other was no legal framework; hence, applications for con- countries considered in this study) or a tradable cessions, construction permits, and tariffs were made certificate scheme is favored, the incentive system ad hoc. This changed in 2004, when a 270 km2 zone for must account for differences in the cost of supported offshore wind projects was designated adjacent to the technologies and their potential to meet government Dutch border [159], within which three projects are cur- targets, given deployment constraints. rently under development [160]. Offshore wind energy is regulated at the national level Other Countries (unlike on-land wind energy), with only the province of Flanders having a coast. Table 32 summarizes Belgian Some brief notes are provided on three further Euro- legislation governing offshore wind development. pean countries not considered in detail for this study, but where recent regulatory reform is likely to have a In reality, the developer has a choice of funding mecha- major impact on the development of offshore wind proj- nisms, with the federal offshore feed-in tariff (FIT) being ects. Outside Europe, there is considerable interest in the most generous [5]. Concession applications are made the United States, and more recently in Canada; Japan, whenever the developer wishes. However, to ensure where two turbines have been built in shallow waters at competition, a public announcement is made and con- Setana [139]; China, where a wind turbine was installed tenders have 30 days to inform the authorities that they Table 32: Belgian Offshore Wind Legislation Subject Level Legislation Domain concession Federal Royal Decrees of December 20, 2000, and May 17, 2004 Wind farm building permit and exploitation permit Federal Protection of the Marine Environment 1999 Offshore cable building permit and exploitation permit Federal Royal Decree; March 20, 2002 Onshore cable permit Flanders Royal Decree; May 18, 1999 Feed-in tariffa Federal Royal Decree; July 10, 2002 a. 90 a/MWh FIT for the first 10 years of operation. Source: [5]. 74 Regulatory Review of Offshore Wind in Five European Countries wish to challenge for the site. The minister will need to 2. A foreshore lease, which assigns exclusive site evaluate the competing proposals and decide which pro- development rights. posal merits success. The submission should define the scope of the EIA, which, unusually, is not undertaken by Prior to construction, three further permits are required: the developer, but instead by a government department MUMM (Management Unit of the North Sea Mathemati- 1. Authorization to construct a generating station cal Models)[162]. 2. A license to generate electricity 3. A license to supply electricity [162]. Details of the Flanders grid code are given in [163]. Wal- lonia does not have a coastline. To date, although a dozen projects have had a license, only one has been constructed, primarily because of the low feed-in tariff payable, of ac5.7/kWh over 15 years, Ireland identical to onshore premiums and lower than the off- Ireland (Eire) has a single offshore wind farm consisting shore wind cap set at ac8.4/kWh under the final round of of seven 3.6 MW wind turbines lying on Arklow Bank the previous competitive tendering under the Alternative of the east Irish coast. It was developed by Airtricity in Energy Requirement (AER) Programme [165]. partnership with the wind turbine suppliers, GE. At that time, no special offshore framework had been created. Further changes to the Irish electricity market include the Hence, this can be considered a demonstration project introduction of a single electricity market on November for Ireland, as well as for both parties involved, since 1, 2007 , with participation mandatory for generators of it was the first offshore wind farm to be built by either 10 MW and above. The recent rapid expansion of the party. Plans for the subsequent phases of this project Irish economy has been accompanied by a similarly have been delayed pending creation of a suitable frame- rapid expansion in electricity demand and plans for a work with sufficient financial support to make offshore reinforcement of the electrical network, including two wind viable. new interconnectors—northward to Northern Ireland and eastward to Wales. The early years of this decade In February 2008, the Irish government announced that (the 2000s) saw a moratorium for new wind farm con- an incentive scheme for offshore wind would be created nections, and recently only three substations, all located and provided a feed-in tariff of a140/MWh. on the east coast, were capable of connecting significant offshore wind energy capacity. This followed an announcement in the most recent white paper, which reconfirmed the commitment to a target of A key challenge for the expansion of RE in Ireland is the 15 percent of electricity consumption to be met by RE by relatively small size of the grid, which delivers electricity 2010 and also introduced a new target of 33 percent by to only around 5–6 million people, and the paucity of alter- 2020 [164]. This compares favorably with EU Renewables natives. Hydropower potential is limited, sunshine is less Directive target for Ireland of 13.2 percent of electricity abundant than elsewhere in Europe, and marine energy consumption in 2010 [35]. In fact, the 2020 target was is insufficiently mature to provide a credible amount of raised from 30 percent and converted from an aspiration electricity at such a close date. Hence, new grid connec- into a commitment compared with the preparatory green tions will be needed, either in the form of a new inter- paper.14 connector, potentially between Ireland and Wales, or in the longer term in the form of a more substantial net- The permitting process for offshore wind farms in Ireland work, such as that envisaged by Airtricity in the Offshore consists of two main steps: SuperGrid. On a final positive note, the offshore wind resources appear to be excellent [166]. 1. A foreshore license, which assigns exclusive rights to the developer to perform an in-depth site assess- France ment within four years and allows the developer legitimate expectations that it will have priority The national target for RE set by the 2001 EU directive is 21 percent by 2010, which requires an increase of 6 14. Editor’s note: White paper generally refers to documents that percent over the 1997 figure [35]. contain proposals and statements of government policy. Green papers generally put forward ideas and opinions for consideration, public discussion, and consultation. Drivers, Barriers, and Experiences 75 To achieve this, onshore and offshore wind are being In addition, as of 2005, the 12 MW size limit was with- expanded, with the feed-in tariff having been established drawn (it was being circumvented anyway by the con- in 2000, including for onshore wind farms of up to 12 MW struction of multiple 12 MW wind farms adjacent to each [140]. In 2004, in parallel with the onshore feed-in tariff, other) and a new requirement was instituted that wind a series of competitive tenders for RE PPAs was offered farms need to be located within a ZDE, zone de dével- by the CRE (Commission de Régulation de l’Energie) oppement de l’éolien [146]. [141], including for larger onshore wind farms and up to 500 MW in total for offshore projects. The conditions for Since 2002 [147], French renewable policy has been the offshore tender included the following [142]: guided by the Programmation pluriannuelle des inves- tissements (Multiyear Investment Program, PPI), with the • Maximum project size of 150 MW 2006 revision specifically identifying a target of 1 GW by • Expected production of at least 2,200 equivalent full- 2010 and 4 GW by 2015 of offshore wind capacity [148]. load hours • Fixed structures (no floating wind turbines per- Lessons that can be learned from the French experience mitted) are as follows: • Siting within the 12-mile territorial zone of mainland France. • Maximum wind farm size tends to be circumvented • Evaluation criteria: price, 60 percent; technical and by construction of multiple wind farms adjacent to financial capabilities, 15 percent; environmental each other. impact and decommissioning, 15 percent; and con- • Feed-in tariffs that depend on equivalent hours out- flict with other users, 10 percent. put may encourage poor utilization of the grid capac- ity, since the wind farm operator is encouraged After more than one year of evaluation, the CRE recom- to use wind turbines with relatively low capacity mended offering PPAs to two projects only, with the min- factors. ister going against this advice and awarding a PPA to a • The first offshore tender of 2004 was not well single project, at Côte d’Albâtre [143]. The other 12 proj- designed and hence has not delivered significant ects were rejected for various reasons, including visual capacity. In the very limited time available, the impact and excessively high bids. According to the con- majority of the bidders could not resolve the conflict- ditions of the tender, the wind farm should have started ing requirements of bidding a low price and hence operating by the end of 2006. However, the delays in requesting a cheap site to develop, on the one hand, the decision process, together with this being a totally versus the need to protect the environment while unrealistic requirement in the first place, means that this taking account of local interests and other users of condition has been relaxed. the seas, on the other. This competitive tender awarded a PPA at the requested Sweden price, as well as a concession, but did not award a construction permit, which had to be applied for in a sep- Svante 1—A World First arate process to the préfet (prefect) of the local depart- Sweden led the world with the first deployment of an off- ment [144]. shore wind turbine at Norgersund, Blekinge, in 1990/91. The single turbine was a 225 kW Wind World unit, which In 2006, the government announced a new feed-in tariff, was decommissioned in 2006, and which in itself was which included offshore wind at ac13/kWh for the first another world first. 10 years followed by a sliding scale between ac13/kWh and ac3/kWh for the next 10 years, depending on the Since then, four more wind farms have been constructed, productivity of the project in the first period. The tariff is as summarized in Table 33. indexed to inflation once the wind farm is in operation. However, it reduces by 2 percent per year for commis- Table 34 presents information on Swedish offshore sioning dates after 2007 . During the second 10 years of wind farms under development. A number of further operation, a sliding-scale tariff between ac13/kWh (2,800 projects have been under development, in some cases full-load hours), ac9/kWh (3,200 full-load hours), and ac3/ for almost a decade. The main reason for the failure kWh (3,900 full-load hours) is available, depending on the of these projects to progress further has been weak proj- productivity of the project in the first period [145]. ect economics because of the current incentive scheme. 76 Regulatory Review of Offshore Wind in Five European Countries Table 33: Swedish Offshore Wind Farms in Operation Project Bockstigen Utgrunden I Yttre Stengrund Lillgrund Location Southwest of Kalmar Sund, Kalmar Sund, Öresund, Gotland Kalmar Län Blekinge Län south of the bridge Status In operation In operation In operation In construction Installed capacity 2.5 MW 10 MW 10 MW 110 MW Number of turbines 5 7 5 48 Turbine size 0.5 MW 1.425 MW 2 MW 2.3 MW Distance to shore 3 km 8–12 km 5 km 10 km Sea depth 6m 7–10 m 8m 9m Foundation Monopile Monopile Monopile Gravity base Commissioned 1998 2000 2001 2007 Turbine manufacturer Wind World Enron Wind (GE Wind) NEG-Micon (Vestas) Siemens Wind Power Source: Garrad Hassan and Partners Limited compilation. Overall National Renewable Energy Target and offshore projects within territorial waters  [153]. In The Swedish production of power based on wind energy addition, the 10 TWh per year target actually only relates is about 1 TWh/year out of a total electricity demand of to the spatial planning system that should allow for the about 135 TWH/year (2006). As of the end of 2006, 571 development of renewable capacity to meet this value. MW of wind capacity had been installed in the country, and net production that year was 0.99 TWh. Renewable Electricity Certificates The Elcertifikatsystemet was introduced in May 2003 for The parliament has set the target for 2015 of 10 TWh/ all RE-based electricity, and it replaced other incentive year corresponding to approximately 4  GW of installed systems. The system is based on a market mechanism to wind capacity. This is characterized as a relatively modest create competition between RE systems and is compa- target, since the potential for deployment in Sweden is rable with the ROC system used in the United Kingdom. thought to be considerably larger than this. Even to attain There is no provision for technology-differentiated sup- the 10 TWh/year target, however, will require a consider- port under this mechanism, so the system encourages able acceleration of deployment, with a 10-fold increase deployment of the cheapest available RE technology. in current RE production. The Swedish government assumes that 60 percent of this 2015 target will come The producer of electricity receives a certificate for each from offshore wind projects outside territorial waters, unit of RE generated. Electricity suppliers are obliged to with the remaining capacity coming from onshore wind buy (or generate) certificates equivalent to an annually increasing proportion of the company’s supply [154]. The RE targets under this scheme are 10.4 percent of supply by 2005 and 16.9 percent by 2010. Swedish Offshore Wind Farms Table 34:  in Planning Significant industry concerns over post-2010 subsidy lev- els led to the extension of the Renewable Energy Certifi- Site Developer Status MW cate scheme in 2006 out to 2030. Renewable generating Klasården Vestas Planned 44 plant is eligible for support under the scheme for a period of 15 years. The quota beyond 2016 will be reduced sig- Utgrunden II E.ON Consented 90 nificantly to allow for generating plants that have been in Kriegers Flak WPD/Vattenfall Planned 500–640 the system for 15 years, to leave it and a more modest level of support for new plant beyond that time. Source: Garrad Hassan and Partners Limited compilation. Drivers, Barriers, and Experiences 77 Figure 24: Average Value of Swedish Renewable Table 35: Value of Subsidy (Miljöbonus) for Energy Certificates Onshore Wind and Offshore Wind Approved Wind Capacity Onshore Offshore Operational Wind Capacity Year [SEK/kWh] [SEK/kWh] Average Certificate Value 2007 0.04 0.14 800 250 2008 0.02 0.13 Average Certificate Value 700 Wind Capacity (MW) 200 600 2009 0.00 0.12 (SEK/MWh) 500 150 2010 0.00 0.00 400 Source: Garrad Hassan and Partners Limited. 300 100 200 50 100 0 0 • Total: ~ SEK 0.65 per kWh ( ~ a0.07 per kWh) 2003 2004 2005 2006 It should be noted that the market electricity price was Source: Garrad Hassan and Partners Limited. subject to significant volatility in 2006 in Sweden because of erratic rainfall and the consequent shortfall in hydro- electric production. In 2005, the average price of the certificate was about Future Changes SEK 225 per MWh. The variation of this price since the The Swedish government recently commissioned an system came into force is presented in Figure 24. The investigation into the connection of RE to the grid [155]. penalty for not buying certificates is a tax of 150 percent The scope of this work is to assess the suitability of the of the price of the certificates based on the average price existing legislative regime for the large-scale deployment in the previous 12 months. of RE. The commission was due to report before the end of 2007 , but little has been published. A guide to devel- Environmental Bonus (Miljöbonus) oping wind farms, with a brief mention of offshore, was For wind power–based electricity, a supplementing sup- published by the Swedish Energy Agency in 2008 [156]. port system has been in force. This system will end by 2010. Offshore wind has received higher bonuses than onshore wind, as seen in the Table 35. Comparative Summary The typical revenue rates to the producer of offshore Table 36 provides a brief comparative summary of the wind generated electricity in 2007 in Sweden are pro- identified drivers, barriers, and experiences for offshore vided below by way of example: wind in the five countries considered. • Market electricity price: ~ SEK 0.30 per kWh • Renewable Energy Certificate: ~ SEK 0.20 per kWh • Miljöbonus (2007): ~ SEK 0.15 per kWh 78 Regulatory Review of Offshore Wind in Five European Countries Table 36: Comparative Summary—Drivers, Barriers, and Experiences Country Drivers Barriers Experience Denmark • Positive government stance Future political uncertainty •  Strong early government Indigenous wind turbine •  support and industrial innovation. industry Regulatory framework has Strong industry lobbying •  matured and benefited from High levels of public support •  simplification and centrals administration by the DEA. Germany • Positive government stance • Lack of suitable turbines No significant offshore Public support for wind •  High costs because of difficult •  deployment to date because of • Limited further onshore sites very weak economics. Increased potential • Financially weak developers incentive will be required to Timing of grid consent and •  address this. Entrance of larger construction players signals the start of a new phase of development. Netherlands • International commitments Unstable support mechanism •  Successive changes to both Developer activity •  Unsuitable and unstable •  the support mechanism regulation and regulatory framework High costs of grid upgrades •  have hindered development. Despite this, a large volume of applications has been made, but the system for dealing with these effectively is unsuitable. Spain • Positive government stance Limited offshore potential •  Regulatory framework for Public support for wind •  using currently demonstrated offshore wind has recently been • Strong developers technology created. There was an apparent • Indigenous wind turbine Significant onshore potential •  attempt to learn from the industry remains experience of onshore wind in Spain and offshore wind in other countries. United Kingdom International commitments •  Grid regulation and costs •  Reform of regulation and National commitments •  Undifferentiated incentives •  incentives for offshore wind in Positive government stance •  the United Kingdom has been Limited further onshore •  implemented and has stimulated potential growth. The alignment of grid regulation to government policy has not yet been achieved, which is a major barrier for future developments. Source: Garrad Hassan and Partners Limited. 6 Conclusions Based on documentary evidence presented in Chapters 2 support for offshore wind, this is unlikely to be enough (Market Development), 3 (Targets and Incentives), and 4 to bring about the necessary changes. (Regulatory Framework) of this report and the inferences discussed in Chapter 5 (Drivers, Barriers, and Experi- ences), several themes have been identified with respect Ineffective Industry Coordination to best practice for the regulation of offshore wind energy. Offshore wind development can be stifled in the absence Clearly, this suggested practice should be adapted appro- of effective industry coordination. In The Netherlands, priately for use in China, but some matters are clearly the wind lobby has been unable to incentivize the gov- beneficial whereas others are clearly detrimental. ernment effectively to make the changes necessary to accelerate offshore wind deployment. This has been partly a result of the lack of strong and influential industry Avoiding Past Failures associations that should be the primary lobbying vehicle for industry. This can be contrasted with experience in The following findings are based on poor experiences to Denmark, where a united and coordinated industry body date in one or more of the national markets considered in has effectively lobbied the government to bring about this study. The root cause is described, along with poten- the development programs and regulatory reforms nec- tial measures that may allow the failure to be avoided. essary for a successful offshore wind industry. The development of a strong, united, and influential Inappropriate Legislative Frameworks industry association provides the coordination neces- Given the relative novelty of offshore wind technology, sary to have a significant impact on government pol- certain areas of the regulatory regime for most of the icy on and regulation of offshore wind deployment. national markets examined are considered inappropri- ate. This theme is of particular importance in the area of Grid Access Difficulties consenting, where,in many cases existing legislation has had to be utilized that was designed to regulate other The review presented in this report identified grid access activities, such as oil and gas exploitation. This can lead to be a significant barrier to deployment in all the national to a complex and uncertain consenting route that can markets considered. Although the detailed reasons for add to project costs, delays, and potential failures. Where this differ, a general conclusion is that where the regula- existing legislation is a significant barrier to offshore wind tion of grid infrastructure is not aligned to national policy deployment, legal reform is necessary. objectives with respect to RE, delays in offshore wind deployment are likely. A good of example of this can be Coordinated industry lobbying of government is the found in the United Kingdom, where the grid regulator most effective way to achieve the required regulatory prioritizes protection of consumer rights and is tasked reform, although in the absence of genuine political with minimizing cost over the delivery of RE. 79 80 Regulatory Review of Offshore Wind in Five European Countries Access to the grid is a significant barrier to offshore Technoeconomic and environmental feasibility for off- wind energy, unless its regulation is aligned to RE shore wind should be assessed at a national strategic policy objectives, and responsibility for costs and level prior to the award of any sites for development. The construction is clearly delineated at an early stage. system for such award would benefit from allowing for a mix of large companies and small entrepreneurial devel- opers to stimulate growth. Political and Regulatory Instability Changes to government policy and the regulatory regime for offshore wind can cause a loss of financial confi- Requirements for Success dence, delaying investment decisions and, consequently, deployment. Experience in Denmark following the can- The following findings are based on positive experiences cellation of four planned offshore wind farms in 2002 can to date in one or more of the national markets considered be said to have damaged the confidence of developers in this study. The causes of this success are described, in that market to proceed quickly with sanctioned sites. along with potential measures that may allow for replica- Instability in the incentive framework in The Netherlands tion elsewhere. has been identified as a major issue in that national mar- ket. Proposed reforms to the incentive regime in the United Kingdom can be considered unsettling for RE in Strong Political Will general, but for offshore wind, the additional revenue A prerequisite for a successful offshore wind market is support it will create has to be viewed as positive for that a good level of support from the government. Unfortu- technology. nately, this is to a large degree beyond the control of any particular industry, since the attitude of an admin- Repeated reform of regulations can be avoided if they istration will be shaped by broader policy and strategic are well drafted in the first instance. New markets for objectives. Although effective industrial coordination and offshore wind should draw heavily on experience in lobbying can play an important role on specific regulatory other countries. A stable regulatory regime engen- issues (as described in finding 2), in the absence of genu- ders higher investor confidence. ine political ambition to deploy RE and specifically off- shore wind, little progress can be made. In the context of the current study, the situation in The Netherlands best Inappropriate Site Awards exemplifies negative experience in this regard, whereas The award of concessionary rights for the development political support in the United Kingdom, Denmark, and of an offshore wind project site can lead to slow build Germany for offshore wind is considered strong. rates if the award is either made to an inappropriate party or the site itself is unviable economically or environmen- tally. Early experience in the United Kingdom has led to Simplify and Centralize the delay of some projects, or even their abandonment, Simplification of the regulatory regime for offshore because of unforeseen technoeconomic or environmen- wind provides more transparency for project develop- tal “showstoppers, ” post–site award. This can be avoided ers and confidence for potential investors. The channel- through early strategic planning to identify appropriate ing of responsibility for the administration of offshore development regions. In Germany, the vast majority of wind through a central agency offers the opportunity for development work implemented to date has been led by a more efficient system through the reduction of con- small independent companies. Since these organizations flict and alignment of strategic policy objectives. Of the do not have the financial strength to construct the proj- national markets reviewed in this study, only Denmark ects and may not have invested sufficiently during the has achieved this system. It has done so, perhaps, at development phase to mitigate key technical risks, these the expense of industrial control over deployment rates projects are likely to be sold to larger players, delaying and the location of future sites. In Denmark, the “one- project deployment. It should be noted, however, that stop-shop” approach has been taken to the extreme, the authors consider a mix of small, “nimble” companies with a single government agency in control of virtually all and major public utilities to be healthy for any particular aspects of offshore wind regulation. More modest suc- national market, and the regulatory regime should allow cess has been achieved in the United Kingdom, where a for such a mix. central coordinating body deals with the majority of the required consents. Conclusions 81 Simplification of regulation provides the necessary Incentives: Fixed Tariff Versus transparency and confidence on the part of industry Certificate Trading to move forward with development of offshore wind. Significant efficiency gains can also be made through In broad terms, two systems of revenue support for off- the administration of the regulatory regime by a shore wind energy have been deployed to date, each with single government agency through the mitigation of the stated aim of encouraging deployment of generating user conflicts and alignment of government strategic capacity in an efficient and effective manner. objectives. The fixed tariff approach can be implemented in two ways: in terms of (1) conventional universally applicable Strategic Spatial Planning RE feed-in tariffs’ (REFITs) potential, with some adjust- ment that depends on project characteristics (for exam- Long-term planning for the future use of the marine envi- ple, prolonged eligibility for the higher tariff for projects ronment at the national level can play an important role in in deep water or far from the coast) or (2) through com- avoiding conflicts with various user groups while meeting petitive tendering. The first approach has been adopted policy objectives on energy. This route has been adopted in Germany and The Netherlands, while the second is to the fullest extent in Denmark and to a lesser degree in currently used in Denmark, has been proposed for Spain, the United Kingdom and Germany. Such an approach is and was trialed with limited success in the United King- also a mechanism for avoiding conflicts between various dom (NFFO or Non-Fossil Fuel Obligation, although no sites and allows for economic grid integration of signifi- offshore sector was included in any of the five rounds) cant wind capacity. To some degree, the European Union and France. In particular, the first approach has virtues of Directive on Strategic Environmental Assessment will simplicity and predictability—mitigating risks associated enforce this approach (for EU states). with revenue security from the perspective of the devel- oper. Disadvantages include the sensitivity of deploy- Long-term strategic planning for the future use of off- ment rates to the exact level of the tariff, the absence of shore regions can improve the prospects for offshore a mechanism for achieving government targets, and the wind deployment through the avoidance of potential potential for increasing costs to the consumer through stakeholder conflicts and improvement in grid con- an unexpectedly wide take-up of the tariff. nection efficiency. A system of tradable RE certificates with an annually Capital Support and Grid Ownership increasing quota, as adopted in the United Kingdom, has the advantage of a link to government targets and, in Capital support for offshore wind projects to date has theory, the deployment of the most economic projects. been provided through two avenues. Grants for R&D A further advantage is that the cost to the consumer is and demonstration projects have been essential for early fixed irrespective of how much RE is deployed. However, deployment, and evidence for such provision, to a greater the converse is also true in that the cost to the consumer or lesser degree, has been found for all national markets is fixed irrespective of how little renewable power is considered. In addition, Denmark, Germany, and, to delivered. some degree, the United Kingdom have opted to provide ongoing capital support to projects through the transfer The principal disadvantages of such a system are its com- of grid connection costs, including export cables and off- plexity and exposure of projects to fluctuating revenue shore substations to the relevant network operator. The streams in more than one market (that is, power, RE certif- former approach has allowed valuable technical experi- icates, and possibly carbon credits in the future)—in other ence to be accrued during the early years of offshore words, multidimensional volatility and risk. In addition, as wind, whereas the latter has provided ongoing alleviation has been experienced in the United Kingdom, nondifferen- of the marginal project economics faced by developers, tiated support can lead to the stalling of a more expensive thus increasing the incentive for deployment. technology, such as offshore wind and unreasonably high returns for cheaper renewables, for example, onshore Capital support for the first offshore wind projects in wind, where a restriction on the deployment volume of any national market is important in order to achieve the latter exists. This can be dealt with to some degree early momentum. Transfer of grid connection costs to through differentiating the value of certificates depending network operators is an important support mechanism on the technology, although it is suggested that this deval- in markets where such costs are prohibitively high. ues the market virtues of the system outlined above. 82 Regulatory Review of Offshore Wind in Five European Countries To summarize: and project sites will be required for this, and the mar- kets that provide them are likely to benefit more from • REFIT can be claimed to be efficient and effective the derived lessons. because it is simple. However, the government needs to be able to judge at what level to set the tariff Technical innovation should be encouraged in order to ensure that it encourages sufficient development to bring down the costs of offshore wind energy in without delivering windfall profits to developers. the medium and long term. This can be facilitated • Competitive tender can be claimed to be efficient through continued funding of R&D and demonstra- and effective because the lowest-cost bidder is tion projects with a focus on offshore-specific tech- awarded the site. However, there are risks that par- nological solutions. ties will submit optimistic bids in the hope that full project risks will not be realized, and then abandon the project if these risks are realized. The likeli- Allow Foreign Involvement hood of abandonment can be reduced through the Offshore wind is an international business, albeit with requirements for substantial guarantees from the the vast majority of important players located in Europe. bidders, although this reduces the field of potential However, specific capabilities in project development, applicants and adds a risk premium to the submitted management, and construction are not evenly distrib- prices. uted through the active markets reviewed in this study. • Certificate trading can be claimed to be efficient Significant benefits can be accrued through the opening and effective because it is a sophisticated market- of national markets to foreign companies with the spe- based system, which can be designed and tuned to cific skills required to deliver offshore wind projects. The allocate each risk to the parties that can manage it prominence of the Danish utility, DONG, in the UK mar- most efficiently. However, the system is complex, ket is an example of how such openness can accelerate which means that it can fail, for example, because of deployment. gaming by participants, changes in market circum- stances, or gross errors in how the mechanism is Access to national markets for foreign companies designed. Simply put, complexity creates risks for all should be provided where skills and experience are parties and hence costs, in terms of the regulation lacking domestically. The benefits of this approach in burden, as well as market inefficiencies. terms of deployment volume and knock-on learnings are of significant value. Experience has shown that both systems can work, although on balance, a feed-in tariff is considered a more guaranteed instrument for encouraging deploy- International Competition ment because of the simplicity and long-term cer- Given the expanding number of national markets with tainty of the system. an active offshore wind industry, it is anticipated that demand for the deployment of new projects will exceed the supply chain capacity to deliver in the coming years. Encourage Technical Innovation In addition, as European utilities consolidate further and The principal barrier facing the offshore wind industry national markets become (generally) more liberalized, currently is high cost. Although the main reasons for there will be an increasing tendency toward deployment this are not inherent to the technology, but rather are of offshore wind in the most attractive national markets. commercially driven, experience has shown that there Both of these factors mean that the instigation of a new is significant potential for cost reduction through techni- national market for offshore wind will only be successful cal innovation. Although ongoing R&D and demonstra- if the incentives for developers are sufficiently attractive tion projects, such as Beatrice in the United Kingdom to be competitive with other parallel markets. and Alpha Ventus in Germany, will play an important role in this regard, a continued effort is required within the Any entrance of a new national market for offshore offshore wind industry to bring capital and operational wind requires a regulatory framework and market costs down. 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[156] Energimyndigheten (Sweden). “Wind Power-Developer.” [164] Department of Communications, Marine and Natural 2057/ET2008:12, 2008. http://213.115.22.116/System/ Resources. “Delivering a Sustainable Energy Future for TemplateView.aspx?p=Energimyndigheten&view=defau Ireland; The Energy Policy Framework 2007–2020.” Gov- lt&cat=/Broschyrer&id=bbb87cfbfc934afb96313e310c9f ernment White Paper. March 12, 2007 . 2d8c. [165] de Vries, H. J., and others. “Renewable Electricity Poli- [157] Swedish National Grid (Svenska Kraftnat SvK). “Guide for ” ECN Report C-03-071, 2003. cies in Europe. the Connection of Wind Power to Grid (Swedish). March 2009. http://www.svk.se/global/06_energimarknaden/pdf/ [166] Sustainable Energy Ireland. “Irish Wind Energy Atlas.” vindkraft/090326_vagledning_vindkraft.pdf Website. http://esb2.net.weblink.ie/SEI/MapPage.asp. Appendix A Consents Timing, the United Kingdom For applications awaiting consent, time is through to August 2008. Figure A–1:Consents Timing Summary, United Kingdom 6 Shell Flats Consented 5 Awaiting consent 4 Teesside 3 Gwynty Môr West of Duddon Sheringham Shoal 2 Scaraweather Sands Ormonde Walney Lincs London Array Scroby Sands Lynn Inner Downing Greater Gabbard Robin Rigg Norfolk/Cromer Thanet 1 Barrow Gunfleet Sands Rhyl Flats Burbo Gunfleet Sands II Kentish Flats North Hoyle Humber Gateway 0 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Source: Garrad Hassan and Partners Limited. 91 92 Appendix A: Consents Timing, the United Kingdom Table A–1: Consents Timing Summary, United Kingdom Project Type Application Award First power generation Scroby Sands EA S36 March 2001 April 2002 July 2004 North Hoyle EA S36 February 2002 July 2002 November 2003 Rhyl Flats EA S36 March 2002 December 2002 Under construction Barrow EA S36 May 2002 March 2003 March 2006 Kentish Flats EA S36 August 2002 March 2003 July 2005 Robin Rigg June 2002 June 2003 Under construction Lynn TWA August 2002 October 2003 Under construction Inner Downing TWA September 2002 October 2003 Burbo EA S36 September 2002 July 2003 July 2007 Norfolk/Cromer TWA November 2002 October 2003 abandoned Gunfleet Sands TWA December 2002 October 2003 Under construction Scarweather Sands TWA January 2003 November 2004 Possibly abandoned Shell Flats TWA January 2003 Teesside EA S36 March 2004 September 2007 London Array EA S36 June 2005 December 2006 Ormonde EA S36 July 2005 February 2007 Close to award of contract Greater Gabbard EA S36 November 2005 February 2007 Contracts awarded Thanet EA S36 November 2005 December 2006 Gwynt y Môr EA S36 November 2005 Walney EA S36 March 2006 November 2007 West of Duddon EA S36 April 2006 Sheringham Shoal EA S36 May 2006 August 2008 Lincs EA S36 January 2007 Gunfleet Sands II EA S36 June 2007 February 2008 Under construction Humber Gateway EA S36 April 2008 Sources: London Gazette, BERR/DTI, ROC database, Crown Estate. Appendix B Consents Experience, Germany Tables B–1 through B–4 summarize the experiences of three wind farms: Borkum West in the North Sea EEZ (Table B–1 and Table B–2), Borkum Riffgatt in the North Sea 12-mile territorial zone (Table B–3), and Kriegers Flak in the Baltic Sea EEZ (Table B–4). Table B–1: Permitting Progress for Borkum West Offshore Wind Farm Date Event Result 1998 Project initiated 1999 Planning preparation started September 1999 Application submitted May 16, 2000 First application hearing at the BSH EIA investigation program defined (Federal Maritime and Hydrographic Agency) August–September 2000 EIA investigation program started February 20, 2001 Application hearing for the sea cable route through the EEZ by Bezirksregierung Weser-Ems & BSH April and October 2001 Ship safety risk analysis (Germanischer Lloyd) submitted to BSH July 2001 BSH approval for wind farm construction Partially granted November 9, 2001 BSH approval for wind farm construction Full approval April 30, 2002 12-mile territorial zone sea cable, for 12-turbine Approved by Bezirksregierung Weser-Ems first phase only May 2003 EIA investigation program completed December 15, 2004 Sea cable through the EEZ, for 12-turbine Approved by BSH first phase only Source: Garrad Hassan and Partners Limited compilation. 93 94 Appendix B: Consents Experience, Germany List of Borkum West Offshore Transmission Cable Permits Table B–2:  Approval Authority Building permission for the pilot phase BSH Permission for laying and operating the cable in the seabed by the Wasser und Schiffahrtsverwaltung des Bundes authorizing agency for river- and navigation-specific police approval (Federal Water and Shipping Authority) Lease contract to use the 12-mile territorial zone for laying a sea cable Wasser und Schiffahrtsverwaltung des Bundes (Federal Water and Shipping Authority) Water and dike permission, approval to cross dikes and waters Bezirksregierung Weser-Ems (Regional Administrative Board) Exemption from the prohibitions of the National Park Bezirksregierung Weser-Ems (Regional Administrative Board) Permission for laying the sea cable in the EEZ BSH Consent for grid connection E.On Netz (network operator) Source: Garrad Hassan and Partners Limited compilation. Permitting Progress for Table B–3:  Table B–4: Permitting Progress Kriegers Flak Borkum Riffgat Date Event Date Event May 2001 Submission of initial application 1999 Project initiated First application hearing July 13, 2000 Application submitted for November 2001 Submission of revised application Raumordnungsverfahren (ROV) to Bezirksregierung Weser-Ems December 2001 Consultation with federal and regional (regional authority) authorities and parties and with general public 2001 Agreement of Wasser- und Schifffahrtsdirektion Nordwest Consultation with Denmark and (WSD NW) Sweden (Espoo Convention [15]) 2002 EIA investigation program started February 2002 EIA Scoping Conference March 12, 2003 Application Meeting determines March 2002 EIA monitoring starts scope of application November 2003 Submission of EIA and Navigation Study 2004 EIA studies completed and submitted to Bezirksregierung Weser-Ems January 2004 Consultation with federal and regional authorities and parties and with general 2005 Local government reorganization public delays application Consultation with Denmark and March 9, 2006 Wind farm details fixed Sweden (Espoo Convention [15]) August 2006 Cable route selected May 2004 Application hearing Permit has not yet been awarded. August 2004 Submission of revised Navigation Study Source: Garrad Hassan and Partners Limited compilation. September 2004 Application hearing for revised submission Consent from Wasser- und Schifffahrtsdirektion regarding navigation March 2005 Cable within territorial waters: Spatial Planning Decision (Landesplanerische Beurteilung) April 2005 Wind farm approved by BSH Source: Garrad Hassan and Partners Limited compilation. Appendix C Consents Experience, The Netherlands Table C–1: List of Permits for Egmond Offshore Wind Farm Permit English Law Date Beschikking Wet milieubeheer Environmental permit Wm September 3, 2004 Beschikking Wet beheer rijkswaterstaatwerken Construction permit Wbr September 3, 2004 Besluit Meetmast Met mast permit Wbr August 27, 2003 Melding wijziging vermogen windpark Change in wind farm layout Wm January 31, 2005 Wbr February 2, 2005 Melding wijziging type wind turbine Change in wind turbine type Wm May 26, 2005 Wbr May 30, 2005 Source: [97]. 95 96 Appendix C: Consents Experience, The Netherlands Table C–2: List of Permits for Q7 Offshore Wind Farm Permit English Law Date Beschikking Wet beheer rijkswaterstaatwerken Construction permit Wbr February 18, 2002 Melding wijziging type wind turbine Change in turbine type October 28, 2002 Melding wijziging ashoogte Change in turbine height May 10, 2004 Besluit wijziging verlichting Change in lighting May 10, 2004 Besluit verzoek tot verlenging Wbr vergunning Attempt to extend permit October 21, 2004 Source: [96]. Table C–3: Program for Egmond Offshore Wind Farm Date Stage Comment 1997 Project originated February 2000 Location EIA completed Compared six potential locations and identified Egmond as most suitable April 2002 Key planning decision made Decision for Egmond site July 2002 Consents tender Shell/Nuon consortium selected March 2003 Key planning decision confirmed Appeals rejected Project EIA undertaken Take account of specific details of project Permit for Public Works Act (PWA) and the Environmental Management Act (EMA) January 2005 PWA and EWA confirmed Appeals rejected; regarding estimates of bird losses January 2005 Financial support mechanism confirmed May 2005 Developers’ decision to proceed By Shell/Nuon End 2005 Onshore construction commenced 2006 Offshore construction Source: Garrad Hassan and Partners Limited compilation The World Bank The World Bank Group Asia Sustainable and Alternative Energy Program 1818 H Street, NW Washington, DC 20433 USA www.worldbank.org/astae