One step closer to kicking off the offshore wind adventure in Norway
On Wednesday, the Norwegian government presented its plans for realising the first phase of the commercial offshore wind adventure in Norway.
The announcement included some long-awaited clarifications for the industry. Below, we will present the key take-aways from the government's announcement, and highlight some of the most crucial matters that remains to be clarified.
Phase 1: 1500 MW at Sørlige Nordsjø II
The government has previously announced plans to develop 3000 MW at Sørlige Nordsjø II. It was confirmed yesterday that the first phase at Sørlige Nordsjø II will be a development of 1500 MW, giving an estimated annual production of 7 TWh (by comparison, approximately 157 TWh electrical energy is produced in Norway annually).
No hybrid cables – for now
Although the industry has argued that hybrid cables are necessary to make development of offshore wind in Norway financially feasible, the government has decided that first phase at Sørlige Nordsjø II will be developed with cables transporting the produced electricity to shore in Southern Norway. The government's reasoning behind choosing radial over hybrid connection is to increase supply of electricity in Southern Norway and thereby ensure lower electricity prices for consumers and power-intensive industry.
"Although many industry players are disappointed with the decision to use radial connection to Norway, it might have been necessary in order to ensure progress of the development of offshore wind in Norway given the current political landscape" says Caroline Skaar Landsværk, partner and head of Wikborg Rein's Energy and Renewables team in Oslo.
The government has not closed the door on hybrid cables for the second 1500 MW phase at Sørlige Nordsjø II, but will await further studies on the matter by the Norwegian Water Resources and Energy Directorate and the Norwegian TSO Statnett, before making any decisions. The study is due to be completed during Q3/Q4 2022.
The government confirmed its plans to use auctions as the main model for granting rights to areas for offshore wind development. An important question in the industry has been the form of such auction model, including potential pre-qualification requirements, which parameters are made subject to competition, and when the award fee will fall due. The government did not present any clarifications in this regard, except that it is working on the model that will enable realisation of the first phase of Sørlige Nordsjø II. While it was previously expected (based on a hybrid cable scenario) that the auction model would be in the form of the developer paying for area rights, it is now expected that developers will compete in the auction based on which project will require the least subsidies.
It has not been confirmed at what time the auctions will open, but the Norwegian Prime Minister, Jonas Gahr Støre, reportedly said that the auctions will be ready for participation in October.
Block division and development of new areas
At the same time as announcing its plans for the offshore wind industry in Norway, the government sent a proposal on division into smaller plots of the designated areas for offshore wind development at Sørlige Nordsjø II and Utsira Nord. As regards Utsira Nord, no further plans for development of financial support were revealed.
The government also announced that it has formally assigned the Norwegian Water Resources and Energy Directorate with the task of identifying new areas for renewable energy production offshore. The work is expected to take nine to twelve months, after which impact assessments will have to be performed before new areas can be opened.