The Norwegian Government announces the first competitions for offshore wind
Wednesday 29 March 2023, the Ministry of Petroleum and Energy published the announcement for the first competition for offshore wind for the project areas Utsira Nord and Sørlige Nordsjø II.
The announcement is broadly in line with the consultation documents from the hearing rounds in December 2022 from the Norwegian Government, however, there are several changes and clarifications. We will in the near future provide further details, however, based on an initial review, we would like to highlight certain updates that the offshore renewable industry needs to take into account.
The pre-qualification application deadline for Sørlige Nordsjø II is 4 August 2023, and the application deadline for Utsira Nord is 1 September 2023.
Both areas will be awarded by the end of 2023.
The announcement and the associated documents are at this point in time in Norwegian only, however, the Norwegian Government is working on a translation that will be published in due course.
Sørlige Nordsjø II
The project area must have a minimum of 1400 MW installed capacity and a maximum of 1500 MW. The land-based grid connection will be limited to 1400 MW. The Norwegian Government is opening up for the possibility to combine the development with electrification of the Ekofisk field and a successful combination will have an impact on the scoring.
The grid solution will be a radial with a connection at Kvinesdal as the primary location. The radial shall be constructed, owned and operated by the developer at the developer’s cost.
The first phase will be awarded to one applicant through pre-qualification, followed by an auction. There is a minimum of six and a maximum of eight applicants who may participate in the auction. Selection will be on the basis of ranking of scores achieved in the pre-qualification assessment.
The Ministry of Petroleum and Energy will propose a preposition to Parliament for authorization to enter a two-sided contract for difference for renewable energy production with a reservation price of KR 0,66 pr kWh. No bids above the reservation price will be taken into account. The auction model is a British auction with open bidding. In case of a draw, the highest score in the pre-qualification criteria will prevail. The contract for difference (CfD) contract will be published at a later stage.
A key take away is that scoring on pre-qualification criteria will be crucial. Both in the pre-qualification and in the case of a draw in the auction.
Developers should take note that a bid will be binding and that the contract for difference contract must be signed within four weeks of the auction, and that failure of signing will result in a fine of MNOK 400, which is backed by an on-demand bank guarantee.
In addition, there will be a maximum amount for subsidies under the contracts for difference contract of BNOK 15. The maximum amount will be mirrored for payment from the developer to the state.
There are certain updates to the pre-qualification criteria, although the main criteria remain the same. Of particular relevance, one should note that the sub-criteria on previous experience / reference projects is softened with regard to previous experience connected to development and operation of HVDC facilities.
Weighting of the main criteria will be:
- Ability to execute is weighted at 60%
- Sustainability is weighted at 20%
- Positive local effects are weighted at 20%
The scoring range is set from 1-10 on each main criteria, and the sub-criteria will not be given separate scores but will be a part of the overall score per main criteria. The best applicant within each main criteria will be given 10 points. The rest will be scored relative to the best applicant.
Utsira Nord will be awarded to three successful applicants on the basis of qualitative criteria. The project areas must each have a minimum of 460 MW installed capacity and a maximum of 500 MW.
If NVEs upcoming work on possible capacity expansion, being due within end of April 2023, concludes that it is possible to expand the capacity, an increase of capacity up to 750 MW will be considered. Meaning that each of the three areas could add 250 MW of production capacity each. The option to expand will be concluded before the competition for financial support.
Post award, the three successful applicants will compete for a support scheme. The support scheme will be based on a two-sided contract for difference for renewable energy production at sea, with a duration of 15 years. As for SNII, there will be a maximum limit for the support that will be available both through a monetary cap and that the support only will be available for 500 MW. Even if the total production capacity will end up being 750 MW.
The Norwegian Government will propose a preposition to Parliament with a proposal for a cost framework and a commitment authorization for support. In the proposal, the Norwegian Government will propose that one project does not obtain state funding. The details of the support scheme and caps will be announced before the competition for the support scheme.
After the areas have been allocated, the developers will conduct an impact assessment and mature the areas further before a competition for state funding is carried out. The project that does not receive state funding will retain the right to the area for a period and may use the general public support system and might become eligible to participate in possible future competitions for support.
It is not decided whether the grid solution will be a joint or separate undertaking on part of the three developers. The radial shall, however as for SNII, be constructed, owned and operated by the developers at the developer’s cost. Applicants should not expect that the grid solution is concluded before submission of application.
There are certain updates to the qualitative criteria, although the main criteria remain the same.
Weighting of the main criteria will be:
- Cost level 2030 is weighted at 30%
- Innovation and technology is weighted at 20%
- Ability to execute is weighted at 30%
- Sustainability is weighted at 10%
- Positive local effects are weighted at 10%
Scoring will be as for Sørlige Nordsjø II.
Some additional general notes:
- The Ministry of Petroleum and Energy is working on a scheme to ensure that it will be possible to establish a mortgage in respect to the concession with facilities.
- There is no firm commitment with respect to not introducing any ground rent during the concession period.
- There will be limitations on an applicant’s right to make changes in its concepts submitted with the applications, and there are statements addressing specific restrictions on changes in ownership in the applicant/the consortium in certain periods (beyond what will be general restrictions set by regulations and the CfD contract).
- A consortium winning the auction on Sørlige Nordsjø II, or a consortium being awarded an area on Utsira Nord, will have to form a legal undertaking in compliance with Havenergilova § 3-5 within 4 weeks after the auction is completed or the notice of an award, respectively.
- The details of the CfD scheme, including the CfD contract, is not yet published.