The government's new proposal means that the licensing process will shift from a developer driven process to an authority driven process.
On 11 June, the Norwegian government issued its white paper on long term value creation from Norwegian energy resources. The government also issued a consultation memo outlining certain proposed amendments to the Norwegian Ocean Energy Act and the Ocean Energy Regulation, amending and specifying the licensing procedures for offshore energy projects in Norway. A guideline report to the licensing process was issued as well.
Read the government's press release here.
In short, the government's proposal means that the licensing process will shift from a developer driven process to an authority driven process. The initial licensing procedure (implemented 12 June 2020) was based on the developers' own initiation and design of specific projects. The amended procedures imply that the authorities will now define project specific areas (i.e. smaller project areas within the opened acreages). These areas will in turn be announced for competition and the market will either be invited to participate in an auction (where the price will be set by the market as such) or a competition based on certain qualitative criteria (where a fixed price will be set by the authorities).
Some key features from the government's consultation memo and guideline report are the following (not exhaustive):
- The authorities will announce competition for specific project areas. Prior to the announcement there will be a consultation process on the conditions relating to each competition. The announcement will clarify whether the competition will be an auction or a competition based on qualitative criteria, and the more detailed framework and terms and conditions for each competition.
- A prequalification process to participate in the competition will be established. Several companies may prequalify together if they wish to develop projects jointly. Key criteria for prequalification will be (not exhaustive):
- Relevant experience for planning, construction, ownership and operation of large offshore projects, including how the organization is staffed etc.
- Relevant experience and competencies within HSE.
- Financial strength and proposed financial structuring of the specific project development.
- The competition process is expected to be concluded within 6-12 months after the announcement.
- The competition for projects in Utsira Nord is planned to be based on qualitative criteria and expected to be announced by the end of 2021, whereas Sørlige Nordsjø II is planned to be an auction based competition and expected to be announced during Q1, 2022. Utsira Nord is suitable for floating installations and the government has stated that at least three areas of up until 500 MW will be awarded. Sørlige Nordsjø II is suitable for bottom fixed installations, and the government has indicated that there will be awarded two or three projects in this area.
- When the competition is concluded, and projects are awarded to various applicants, the award of a project area gives the relevant applicant an exclusive right to perform an environmental impact study, and, later on, to file the license application within certain deadlines. If the deadlines are not met, the project may be announced for new competition or awarded to another applicant.
- On 8 June, before the release of the consultation memo and the guideline report, the government stated (here) that Statnett will be designated as the system operator for offshore grid (excluding cables under the scope of the Petroleum Act). Further, it was stated that legal aspects of ownership and operation of offshore grid will nevertheless be further assessed and clarified, but that developers must in any case be prepared to cover the costs of establishing offshore grid for connection of offshore wind farms.
In conclusion, the government's proposed amendments to the Ocean Energy Act and Ocean Energy Regulation, together with the guideline report, set out a more predictable framework for the licensing process for offshore energy projects than the current regime. The amended licensing process also provides the authorities with the opportunity to adapt the regulatory approach depending on the authorities' goals and ambitions for various acreages (either it relates to facilitating development of profitable bottom fixed projects or stimulation for floating wind technology). However, we note that the deadline for the consultation process is 20 August 2021, and the final licensing procedure remains to be concluded and implemented during the autumn of 2021.
It is also worth noting that the government invites the market participants to provide input to the consultation process concerning the license award model which has now been proposed. Further, the government requests interested parties to opine on the prequalification process, and inter alia what fields of expertise developers must possess in order to be able to develop large scale wind farms offshore in Norway. The government also requests feedback on how a consortium of companies should be allowed to prequalify collectively. Finally, the government especially requests input to be able to assess what the most relevant criteria would be for the qualitative award which is foreseen for Utsira Nord (given the aim of development of floating wind technologies in this area).
Our renewables department remains available if you would like to get more details on the ongoing process.