On Friday 31 May, Dutch Minister for Energy and Climate Rob Jetten informed the Parliament in a letter on the intended procedure for the next tenders for the Wind Farm Sites IJmuiden Ver Gamma and Nederwiek I. The intended procedure will be a comparative assessment (non-price criteria) with a financial bid.
This is the second tender round in which about 4 GW will be licensed at the same time, following the tender round for the IJmuiden Ver Alpha and Beta sites for which the winners are planned to be announced later this month (June).
Tender procedure
The intended procedure of comparative assessment and financial bid aims to stimulate and challenge parties to come up with innovative solutions for social objectives, which will contribute to the further growth of offshore wind energy. The financial bid is added to safeguarde competition and the value that the sites can have for Dutch society. A financial bid also helps to differentiate between substantively similar applications. In determining the details of the financial bid (weighting and level), attention will be paid to the business case for offshore wind farms and the relationship with the ranking criteria and preconditions. The exact interpretation of the ranking criteria, weighting and preconditions can influence the financial return. In a comparative assessment, it is not mandatory to address all criteria in a permit application, so parties can also choose to submit a very low financial bid.
When ranking applications, at least the amount of the financial bid, the certainty of realization of the wind farm and the wind farm’s contribution to energy supply will be considered. Additional ranking criteria or rules will be established that will factor into the ranking and evaluation of permit applications. The permit for the sites us aimed for maximum forty years.
Fallback procedures: two-sided CfD and subsidy with excess profit limitation
For the business case of offshore wind farms, it is very important that the development of demand matches the development of offshore wind energy. A different approach may temporarily be needed for the licensing of offshore wind energy to bridge the period in which demand does not yet sufficiently match supply, also given current market conditions. To respond to this, the Minister is exploring – as a fallback option – several possibilities. Subsidy with excess profit limitation or a two-sided contract-for-difference (CfD) are temporary options in this regard, but come with several major challenges.
These include: finding budgetary coverage, fitting into the legal system and obtaining state aid approval from the European Commission. The advantages of a two-sided CfD compared to subsidy with excess profit limitation are that society can benefit, if market conditions turn out to be very favorable, which is in line with the European regulation on the reform of the EU electricity market (Electricity Market Design). Research is currently done into how two-sided CfDs can be implemented within Dutch law, both for offshore wind energy and other technologies, so this mechanism can – if necessary – be deployed in the future. The fallback options mentioned here could however be market-distorting, which is why the Minister is cautious about deploying these fallback options and, if necessary, want to minimize their use.
IJmuiden Ver Gamma & Nederwiek I
Site IJmuiden Ver Gamma is located approximately 53 km off the Dutch coast. Site Nederwiek I is located in the southern section of the Nederwiek wind farm site, some 95 km off the Dutch coast. The future wind farms will each be connected via two 2 GW DC offshore platforms (socket at sea) to a land-based substation at Maasvlakte (IJmuiden Ver Gamma) and Borssele (Nederwiek I). The expected commissioning of the wind farms is in the second quarter of 2031 (IJmuiden Ver Gamma) and Q4 2030 (Nederwiek I).
Site sizes
In his letter to Parliament, the Minister says he has decided to investigate a site size of 1 GW as an alternative to the originally envisioned size of 2 GW for the upcoming permitting procedures. His decision is based on the outcome of research and input received from market players. At the same time, he is also investigating the option of one site of 2 GW and two sites of 1 GW.
To ensure that 1 GW lots are workable, the Minister will have more research performed. For instance, mutual dependencies and obligations and the (financial) risk allocation between TenneT, as the responsible party for the grid connection, and two wind farm developers (instead of one wind farm developer for a site size of 2 GW) should be sufficiently clear. Additional social costs should be prevented. Another element to consider is the impact on the supply chain. The Minister also wants to examine the implications for the timelines of the lot decisions, and thus potentially the implications for the timelines of the permitting procedures and construction time for the wind farms. Finally, he wants to examine whether and to what extent there is room for overplanting in the sites. The Minister intents to inform the parliament about the chosen site size around the summer.
Turbines sizes
The Minister states in his letter that he intents to have a maximum tip height of 1000 feet (304.8 meters) in IJmuiden Ver Gamma and Nederwiek I. He also informs the parliament on the subject of standardization of wind turbine sizes. All things considered, e.g. the continuing turbine developments in the international markets, he does not consider it desirable at this time for the central government to prescribe standardization of wind turbine dimensions.
Read the full letter (NL) here.
