It came as a bit of a shock to most in the wind turbine industry when the press release from the Danish Energy Agency ticked in: The agency has put the case processing of offshore wind turbine projects and other renewable energy projects under the open door scheme on hold.
The Ministry of Climate, Energy and Supply, in dialogue with the government's State Aid Secretariat, has assessed that the granting of permits for offshore wind turbine projects and other renewable energy projects under the open door scheme may be in breach of EU law.
- It was almost like I froze when I heard about the Danish Energy Agency's decision. This is not just a matter between the state and the EU, but something that has huge consequences for the existing projects that are underway in the municipalities, says Birgit S. Hansen (S), mayor of Frederikshavn Municipality and chairman of KL's Climate and Environment Committee.
Because with the state putting the case processing on hold, a number of municipalities must now wait even longer for a clarification for the applications that the Energy Agency has received for areas off the municipalities' coast.
Kommunen.dk's previous mapping of the latest round of applications showed that the Danish Energy Agency had received 27 applications for new offshore wind farms in the first half of 2022.
Of these, 11 projects are located off the municipalities' coast, where the municipalities' right of veto applies. The municipalities are therefore a decisive actor in the process and have therefore been involved from the start:
- Although it is the state that has the final decision, these projects always start with an inquiry at the mayor's office, says Birgit S. Hansen.
The developers like to consult the municipalities early on in order to organize the project in such a way that it is possible to secure support from the local population. And there are plenty of advantages in the projects for the municipalities, shows a previous survey among the mayors, which Birgit S. Hansen also emphasizes:
- It is about jobs, green electricity for the companies, local investors, tourism and not least the citizens, who have an expectation that we also contribute to the green transition, she says.
Pulls the handbrake
The handbrake on the scheme, which was introduced in 1999, specifically means that the case processing of projects for more than 20 GW of offshore wind is put on hold, according to Green Power Denmark.
The industry reacted quickly and placed advertisements in the country's newspapers with the headline "Can we live with closing the door to the green transition?", when the Energy Agency's announcement hit the public.
- It is a serious situation for the green transition and especially for the market players who are ready to invest in this form of offshore wind. There should be no doubt that I am deeply frustrated that, at a time when we need more green energy so much, we are now in this situation. But rules must be observed, and I respect that the Danish Energy Agency must act at the risk of conflict with EU law, Lars Aagaard stated on Monday in a press release from the Ministry of Climate, Energy and Supply.
At first the blame was directed at the EU, but the commission was able to announce that it was on its own initiative that the Danish Energy Agency and the ministry have put the scheme on hold.
The EU challenge, in short, is that the open door scheme is based on a first-come, first-served principle, where private companies bid on areas that have not already been reserved by the state for tendering offshore wind. With the first-come, first-served principle, the developers do not have to pay the state for land, which may therefore be in breach of the EU's competition rules.
However, it is not unimportant that the state also misses out on a good income for the seabed, which can turn out to be worth a lot of money. The latest state tender for offshore wind, Thor Offshore Wind Farm, is expected to bring the state DKK 2.8 billion. DKK.
“Scandalous” decision
In the industry, to say the least, people are surprised and frustrated by the government's decision.
- This is scandalous. Now we are only left with the planned nine gigawatts of offshore wind, for which tenders have not started at all. At the same time, we see that the expansion of wind turbines and solar cells on land is creeping along, says Kristine Grunnet, head of department for offshore wind at Green Power Denmark.
Less than a year ago, the Folketing adopted an adjustment to the Open Door scheme, where the municipalities, among other things, exchanged their right of objection for a right of veto. In this connection, the Folketing found that the bill did not contain aspects of EU law. Therefore, to say the least, it is a surprising move that the government has taken by closing the scheme completely, says Kristine Grunnet.
- The open door rules have existed for almost 25 years, and the companies have spent money and effort in good faith to apply for permission to build offshore wind turbines. It is unheard of and extremely damaging to trust if doubts generally arise about the applicable rules.
The government has just called for negotiations on the upcoming state tenders for offshore wind farms. However, the negotiations on the state tenders do not solve the challenge of lack of electricity, as the state tenders have historically taken longer to realize than projects through the open door scheme.
Uncertain ground during projects
Lars Aagaard has already been called into consultation, while Prime Minister Mette Frederiksen (S) has assured that a clarification of the challenges to the scheme will be found as soon as possible. But until then, there is "total uncertainty" about the scheme and not least the project applications that have been sent out, says Kristine Grunnet.
She does not want to speculate on whether the government wants more control over the development of offshore wind or more income in the style of government tenders.
- We do not know what the government's motives are. But this is the reverse world compared to what we have seen before. Investors and companies are ready. They are willing to throw themselves into the projects at no cost to the state. On the contrary, they will make a financial contribution to the municipalities and possibly the state treasury. But the government says no thanks. It is difficult to understand, she says.
Lars Aagaard's party chairman, Lars Løkke Rasmussen (M), opened up last autumn that companies that had to apply through the scheme had to pay "a social contribution" without getting any closer.
In advance, the companies pay into the so-called Green Pool scheme, from which the municipalities receive money. Based on the projects that the Danish Energy Agency has received in the latest application window, the affected municipalities can receive up to DKK 1-2 billion. DKK through the scheme.
New distribution for debate
If the companies have to pay the state for access to the land, the income from the projects will logically be reduced. However, Birgit S. Hansen is not afraid that this will stop companies from applying for the attractive locations for offshore wind farms in the future.
KL wants the local communities to have an even bigger piece of the pie going forward in the form of local funds that, in addition to the Green Pool scheme, can contribute to creating support and development locally.
- It is clear that there will be less money if the state is also to have a bite. It is clear that a local return must not stand in the way of these projects being realised, but there must be a balance. It is us in the municipalities who have to build up the coast and live with the wind turbines, so we don't end up having to duck our necks, says Birgit S. Hansen.
First of all, she wants the government to solve the EU challenge as soon as possible, and that you can then look at how the cake should be cut.
Kristine Grunnet hopes that the government will maintain the conditions that were in force when the developers applied for access to the sea and coastal areas, and that legislation is not made with retroactive effect:
- It will be a huge stretch. Having said that, we are entering into a constructive dialogue with the government about how we can resolve this chaos in the first place. We are aware that the offshore wind resources in Denmark belong to all of us, and we would like to have a dialogue about how the industry can make a meaningful contribution to society, while at the same time it is still possible to invest in offshore wind farms in the future, she says.
However, she also makes it clear that the cake does not get bigger by cutting it into several pieces:
- We plant windmills – not money trees. We think it is reasonable to maintain the contribution to the municipalities, because it contributes to the local communities. If the state is to receive more, it may affect the contribution to the municipalities.
This article was previously published by DOI.dk's sister media Kommunen.dk.
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