The Norwegian Government opens two areas for the development of offshore wind. In addition, a regulation pursuant to the Ocean Energy Act is determined. The regulations describe the process and system for offshore wind power licensing. With these two decisions we are one step closer to the development of large scale offshore wind in Norway. However, there are in our opinion two particular issues that the Ministry of Petroleum and Energy must sort out to ensure predictability for potential developers.
Opening of Utsira North and Southern North Sea II
On June 12, 2020, the Norwegian Government opened two areas for the development of offshore wind: Utsira North (Utsira Nord) and Southern North Sea II (Sørlige Nordsjø II). Sandskallen-Sørøya Nord outside Hammerfest will not be opened as proposed in the consultation memo from July 2019, amongst others for the consideration of fishing and seabirds.
Utsira North is chosen, amongst other things, because of its suitability for floating wind power and because the area is close to land and technically-economically one of the best areas. The area is open for development of a total of 1,500 MW.
Originally, the Ministry did not propose to open the Southern North Sea II, but they called for input regarding this area as well, and has now concluded that the area will be opened. This is partly due to the fact that many businesses have shown great interest in the area. The area is open for development of a maximum of 3,000 MW.
Regulations pursuant to the Ocean Energy Act
The Government has adopted new regulations pursuant to the Ocean Energy Act. The regulations follow to a large extent the licensing process for onshore wind power. However, a new element is that relatively short deadlines are set to ensure that projects are not put on hold: The process is opened when a developer sends a notification with a proposal for an assessment programme for a limited project specific area within the opened area. The Ministry will determine the assessment programme (however, there are no specific deadline for the Ministry's decision). It's important to note that the Ministry can only approve one assessment programme for one specific area at a time, meaning that the right to proceed to a license application based on an assessment program is exclusive for the developer. The Ministry has warned that further regulations will come, specifying the criteria that the Ministry will consider in situations with competing projects.
Subsequently to the Ministry's decision to determine an assessment program, a license application must be submitted no later than two years after the assessment programme has been determined by the Ministry, and thereafter, an application for approval of a detail plan must be sent within two years after the licensing decision. The facility must finally be put into operation within three years after the detail plan has been approved. The deadlines can be extended up to two years at a time. In addition, the regulations include distinct rules for offshore wind power on administration fees and compensation for fisheries.
The regulations are definitely a step further on the road to establishing a large scale offshore wind industry in Norway. However, there are at least two further aspects in the regulatory framework that require the Ministry's attention in order to ensure predictability for potential developers. Notably, this applies to (i) how potential conflicts of several applicants in one area shall be handled, and (ii) how one can provide adequate security for project financing.
Several applicants in one area
The Ministry has not yet established a precise and predictable system for determining who should develop a project if several developers want to apply for a license in the same area. The regulations only stipulates that several assessment programmes for the same area cannot be processed at the same time. The Ministry has also indicated it may await the handling of notifications to see if several players show interest in the same area, and then consider more closely who should be entitled to proceed with a license application. In that case, there will be a need for criteria or rules for how such a competition is to be decided. The Ministry seems to agree, as they state that a "criterion for distinguishing applicants may be needed in cases where the projects are rather similar". The Ministry states that this can be determined through regulations, and that they will revert on this matter. Such rules must be transparent, objective and non-discriminatory and should provide predictability to an industry where several different types of developers are likely to appear onwards.
Pledging of wind power licenses?
Although there is an opening for floating installations and associated facilities to be pledged through voluntary registration in the Maritime Register, there is no corresponding system for bottom fixed turbines. When it comes to offshore wind power, one cannot pledge any land lease rights under any landowner agreement as for onshore wind power, nor can one pledge the license as such. Several of the consultation bodies therefore called for rules for pledging of installations, cables and the license itself. However, the Ministry has not considered this further on the simple grounds that they find that the Offshore Energy Act does not provide legal grounds for the establishment of a separate pledge register for offshore wind farms. Nevertheless, the Ministry seems to agree that such a register for pledging assets would be highly appropriate. The lacking possibility to pledge offshore wind turbines has been pointed out since the Ocean Energy Act came into force in 2010. This is a significant challenge as the development of offshore wind power in all probability will take place as loan-financed developments. In our opinion, this is a matter that the Ministry must sort out as soon as possible.