This is a segment from the latest edition of the report “Offshore Wind: Global Regulatory Framework in Selected International Locations, Fifth Edition 2024,” produced by The Global Forum Offshore Wind. This segment specifically examines Germany and the Netherlands.
Germany
Current status of offshore wind development and projects: At this time, Germany is recognized as one of the largest markets globally within the offshore wind energy sector. Not only does it possess the third largest installed offshore wind capacity in the world, but it is also home to several significant players in the international arena. In 2023, wind energy remained the dominant source of electric power in Germany, trailed by brown coal, solar, natural gas, biomass, black coal, hydropower, and nuclear energy. Public electricity generation from offshore wind farms reached approximately 23.5 TWh, while onshore wind farms contributed 116.3 TWh, collectively making up 139.8 TWh out of a total of 435.8 TWh of public electricity generation. This represents an overall increase of 14.1% in comparison to the prior year, leading to a share of 32% for wind-generated electricity: 5.4% from offshore and 26.7% from onshore wind. While 38 offshore wind turbine generators (OWTGs) with a nominal capacity of 342 MW were installed in 2022, 2023 saw a slight decline in offshore wind power installations, with only 27 new OWTGs generating 257 MW coming online. During the first half of 2024, 36 OWTGs with a nominal capacity of 377 MW were installed and began feeding into the grid, and 25 OWTGs with a capacity of 271 MW were also installed but had not yet started feeding in.
Projected market dynamics until 2030 and beyond: Given that the development of the initial eight GW of offshore wind turbine capacity took over 13 years, following the launch of the first offshore wind farm in 2009, these expansion strategies indicate a significant and rapid advancement for the German market in the forthcoming years. Moreover, the latest draft update of the site development plan anticipates that 60 GW will be installed by 2037. To capitalize on this potential, Germany made considerable revisions in 2022 to the regulations concerning tender rounds that allocate development sites to offshore wind farm builders. In 2023, Germany signed the Ostend Declaration of Energy Ministers regarding the North Seas as Europe’s Green Power Plant, committing alongside Belgium, Denmark, France, Ireland, Luxembourg, Norway, the Netherlands, and the UK to a series of energy initiatives. Collectively, these nine countries aim to install 300 GW of offshore wind energy capacity in the North Sea by 2050.
Regulatory framework
Federal level: The primary federal legal instruments that establish the regulatory environment for offshore wind energy include the Offshore Wind Energy Act, the Renewable Energies Act, and the Energy Industry Act. The Renewable Energies Act includes guidelines concerning the overall development of renewable energy from all sources, applicable feed-in tariffs, and market premiums. The Energy Industry Act mainly governs matters related to the operation and access to the electricity grids. Regarding offshore wind energy, this act encompasses regulations concerning the obligations of transmission system operators to construct and operate the grid connection systems for OWTGs and compensations for failure to comply. The administrative authorities responsible for enforcing the aforementioned legal acts are, chiefly, the Federal Maritime and Hydrographic Agency, associated with the Federal Ministry of Digital and Transport and involved in specific planning and site development.
State level: If installed within the territorial sea, the construction and operation of OWTGs (and other facilities) require a permit issued by the relevant state authorities based on the permitting regime of the (general) Federal Immission Control Act, rather than the Offshore Wind Energy Act.
Scheme regarding exclusivity to build, own, and operate a project, as well as to receive feed-in revenues
Exclusivity: Under the German regulatory framework, the successful bidder in the public tendering process receives the exclusive right to build, operate, and (potentially) obtain subsidies for OWTGs. According to the Offshore Wind Energy Act, the bidder awarded a specific offshore wind development site gains sole rights to participate in the procedures for planning approval or planning permits, which are essential for the construction and operation of OWTGs.
Different tender processes based on pre-investigation: The 2023 revision of the Offshore Wind Energy Act introduced significant changes to the tender regime for offshore wind sites. Previously, a “central” model was applied, wherein the German federal state was responsible for not only the spatial planning but also the pre-examination of potential installation sites.
Site Development Plan: Initially, the Federal Maritime and Hydrographic Agency (BSH) develops a “Site Development Plan” for the exclusive economic zone (EEZ) (and if agreed with the states, also for the territorial sea), which serves as the primary spatial planning tool concerning the OWTGs and grid connection systems (GCSs). This Site Development Plan establishes zoning regulations primarily related to OWTGs and GCSs, including designations of eligible zones (Gebiete) and specific sites within zones, sequence of site participation in the tendering processes; target installation years for OWTGs at specific sites or related GCS, areas for converter platforms, etc.
Site pre-investigation: If the site development plan determines that a pre-investigation of a particular site will be conducted, the pre-investigation will be managed by the relevant authority with the aim to (i) evaluate the suitability of the sites, (ii) assess certain aspects that are independent of the actual project design in order to expedite the process.
Tender process
(i) Sites without pre-investigation: While the initial stage of the tender remains unchanged from the procedure prior to the 2023 revision of the Offshore Wind Energy Act, the reform introduced an auction as a second stage (“dynamic tender process”).
(ii) Sites with pre-investigation: Following the 2023 reform of the Offshore Wind Energy Act, the evaluation of bids for centrally pre-investigated sites considers not just the economic bid value in euros per MW, which reflects the payment to be made by the bidder to the state, but also four additional criteria.
(iii) Delays and consequences of delays: Bidders are bound by specific project realization milestones. Should there be delays in project realization, the bidder faces penalties payable to the relevant transmission system operator (TSO).
(iv) Security: Bidders are required to provide security to the Federal Network Agency, which safeguards potential TSO claims for penalties.
(v) Bid volume: The bid volume (installed capacity) must align with the quantity tendered for the specific site.
Incentives for investments: Considering that pre-investigated sites are ineligible for receiving public subsidies, the support framework of the Renewable Energies Act would apply in
The principle solely pertains to OWTGs on platforms without prior investigation.
Timeline for the execution of the project: The successful bidder is subject to a project execution schedule (cf. sec. 81 of the Offshore Wind Energy Act) wherein specific milestones must be fulfilled up until achieving the OWTG’s technical readiness for operation.
Public regulation and regulatory approvals
Offtake, compensation, and tariff structure: Under the Renewable Energies Act, a so-called “direct marketing” concept is in effect, indicating that the generated energy is sold to a third party, unless the electricity is utilized in the immediate vicinity of the OWTG and is not conveyed through the grid. In practical terms, this implies that the produced electricity is sold under a power purchase agreement (PPA).
Consequences of a project delay: The implications of a delayed project completion regarding the offtake regime generally depend on the respective stipulations in the PPA. Typically, a delay of the project or OWTGs would, following the expiration of a grace period, entitle the offtake to request a reasonable adjustment of the pricing.
Grid and Grid Connection: According to the Offshore Wind Energy Act, the acceptance of the bid grants the winning bidder the right (i) to obtain a physical connection of the OWTGs with a specific GCS and (ii) to utilize the connection capacity, both limited to the amount of capacity accepted in the bid.
Netherlands
Current status of offshore wind development and initiatives: The Netherlands aims that by 2050, all energy utilized in the Netherlands will derive from sustainable energy sources. As part of the efforts to achieve this goal, it has been agreed in the Climate Agreement that by 2030, 49 TWh (approximately 11 GW) of energy will be generated through wind power. In 2022, the Dutch government elevated the target for offshore wind capacity from 11 to 21 GW by 2030/2031. In April 2024, the Dutch Minister for Climate and Energy announced a delay, stating that the offshore wind capacity of 21 GW is now anticipated to be achieved by 2032. Currently, there are 10 active wind farm zones in the Dutch North Sea. Once the target of 21 GW is met, wind energy is expected to account for roughly 75% of the total electricity in the Netherlands. It is noted, however, that electricity represents about 20% of total energy consumption while approximately 80% of energy usage in the Netherlands comes from coal, oil, and gas. The Dutch government places significant importance on the development and construction of new offshore wind farms. Simultaneously, the government acknowledges that the North Sea experiences heavy usage, including for fishing, is one of the busiest international seas in the world, and necessitates ecological restoration and nature preservation. According to the Climate Agreement in 2013, the Netherlands was set to produce 4.5 GW of wind energy in 2023. However, the actual capacity achieved in 2023 was 4.7 GW, which was accomplished on schedule.
Offshore wind support system: The Netherlands Enterprise Agency manages the offshore wind energy subsidy and permits tenders on behalf of the Dutch State. In tenders involving subsidies, the funding is sourced from the state’s Stimulation of Sustainable Energy Production program. The production of renewable energy isn’t always profitable as the cost price of renewable energy may exceed the market price. SDE++ compensates OWFs for the disparity between the cost price and the market price for a predetermined number of years.
Public regulation and regulatory permits: The spatial planning of OWFs in the Netherlands is primarily governed by the OWEA and the Water Act. Within the National Water Program 2022-2027, grounded in the Water Act, the Minister of Economic Affairs and Climate Policy can designate areas seen as suitable for OWFs. A so-called Wind Farm Site Decision may be approved for the establishment of an OWF in a designated area. Indeed, there have been site decisions for OWFs IJmuiden Ver Alpha and Beta, and there will also be site decisions for OWFs IJmuiden Ver Gamma and Nederwiek I.
Offtake, compensation, and tariff structure: The development of an OWF entails numerous expenses. The development process requires time and involves extensive studies, procedures, and consultations with local residents and other stakeholders. There are construction costs related to the OWF, the procurement of the wind turbines, grid integration, and expenses after the wind farm becomes operational. The use of long-term contracts for the purchase or sale of electricity is on the rise. A PPA is designed to mitigate financial risks by establishing a long-term pricing agreement with a buyer. As there is no legislation on these PPAs, no specific stipulations regarding the content of such PPAs exist. Nevertheless, in practice, certain established market customs dictate the usual and requisite contents. Additionally, the Electricity Act and the Offshore Grid Compensation Decree outline the liability framework applicable to the OWF owner in the event of a delay in the completion of the offshore grid or the unavailability of the offshore grid.
Planning and construction of the grid connection system: Based on the Electricity Act, the Dutch government appointed the company TenneT as the onshore and offshore transmission system operator. TenneT is responsible for designing, constructing, and operating the onshore grid connection. TenneT will enter into a Realisation Agreement and a Connection and Transmission Agreement with the OWFs. In the Realisation Agreement, the terms and conditions overseeing the establishment of the connection of the OWF to the Offshore Transformation System are detailed.
Access the report here
