Energy and Climate Change | Floating Offshore Wind in Norway – regulatory update
Background
The Utsira Nord area was opened for offshore wind development in 2020 and the competition was first announced in March last year. Since then, the UN competition has experienced significant delay mainly due to the approval process of the state aid support with ESA. The Utsira Nord competition is now scheduled for 2025, at the same time as the competition for the extension area of the Sørlige Nordsjø II (bottom fixed) and the new area Vestavind B (outside Mongstad).
Today the Ministry published the long-awaited consultation hearing of the proposed support scheme. This is an important step on the path to effectuation of the first competition for award of development rights to large scale floating offshore wind areas in Norway.
Our key take-aways below:
Two step model remains Ministry’s preferred model for UN and is also the preferred model for Vestavind B: The contemplated two step model, with competition for project area development rights first, and subsequent competition for state support remains the Ministry’s preferred model for Utsira Nord, and the Ministry also propose to apply the same model for the Vestavind B.
Competition based on qualitative elements: The competition for the Utsira Nord and Vestavind B areas are contemplated to be based on qualitative elements in line with the previous hearings, i.e. cost-levels, innovation and technology development, ability to perform, sustainability and positive ripple effects.
The competition for state support:
Separate competitions vs. a combined competition: The Ministry informs it is considering two different alternatives, where the first alternative is that one competition comprising both the areas that have been awarded in Utsira Nord and Vestavind B competes for the state support. The other alternative considered by the Ministry is to hold the state aid competitions separate, with the first for the UN project and the second for remaining project areas (including those that did not succeed in the first UN competition).
- State support limited to a number of projects vs. aggregate allocation pot. The Ministry informs it is considering whether to limit the state support to a specific number that has been awarded development rights, or whether to hold the competition as a support per MW (and thereby de-link it to number of projects).
- Subsequent state support rounds: The Ministry is also considering whether projects having been granted development rights that are not successful in the first competition shall be eligible to participate in subsequent state aid competition rounds.
The support instrument:
- CfD vs investment support: The Ministry considers either to structure the support through contract for differences (same as for SN II) or by way of direct investment support (CAPEX support).
Updated LCOE- estimates: CEEAG requires that the assumptions underlying the state aid is substantiated. In the consultation paper, the Ministry presents updated cost estimates based on cost assumptions provided by AFRY. The Ministry asks for input on the updated estimates including on costs, revenues and net present value assumptions.
The main consultation elements: The Ministry is asking for responses to 16 specific questions. The questions range from specific state aid law related (CEEAG) related questions on potential for renewable energy production from other technologies than floating offshore wind and input on the estimates for subsidies per tonne of CO2 equivalents, to input on the competition design including on the support instrument and competition model.
Link to the consultation paper here.
The deadline for providing response to the consultation is 23 August 2024.