The Netherlands: Offshore Wind Power Generation Financing

The Netherlands Offshore Wind Power Generation Financing

International law firm Norton Rose recently hosted a round table discussion in Amsterdam together with Rabobank and PwC, led by energy partner Weero Koster. The reason for this event was the ‘Government Accord’, announced by the Dutch newly elected government.

The round table was attended by a great number of parties involved in the Dutch offshore wind industry, from industry to politics to the academic community. The event was set up as a dialogue by all participants on challenging questions and issues raised by the speakers. Speakers that represented the politics were Jan Vos (PvdA) and René Leegte (VVD). Jens Suhrbier (Norton Rose Hamburg) and Nicholas Pincott (Norton Rose London) discussed the situation in their countries. The industry side was represented by Marc Schmitz (Rabobank International), Jeroen van Hoof (PwC), Johan van Wijland (Van Oord Offshore Wind Projects) and Remco Boersma (Nuon/Vattenfall).

These discussions led to seven interesting conclusions. At first the Dutch rationale for renewables in the Netherlands has changed from saving the world from global warming and climate change, to protecting the Dutch economy in crisis and contributing to the security of supply by fuel diversification. Second, the Governmental Accord improves the position of Dutch offshore wind power generation, but there are large differences in the interpretation of the Accord by the coalition partners. The liberal view stresses cost reductions and the need for a self supporting offshore wind business case, whilst labour advocates investment in job creation and economic growth. Thirdly, lessons to be learned from neighbouring countries are to keep the legal framework stable and reduce, to the extent possible, legal and country risk; that a ‘feed-in tariff’ may not be the best solution for all situations; to focus on the organisation of permitting zones to facilitate cooperation by developers and to increase the focus on the stability of the supply chain. It is important to be aware of the limited capacity to, and consequences of, attempting to pass any and all risks on to the contractor and of the costs attached that approach and to institute a ‘green bank’. The Dutch legislature is willing to facilitate by improving the permit system from a technically- to a functionally driven system, by creating more ‘bundeling’ in the offshore grid, by international cooperation with neighbouring countries and by innovation in financing such as government backed loans by public financing companies.

The fourth conclusion of the roundtable was that offshore wind power generation costs have to reduce through reduction of, particularly, OPEX while increasing the lifecycle of electric output, but still there will be a shortage of capital. This may be addressed by innovative financing structures that allow insurance companies, pension funds or bond markets to provide funding after construction. Further, cost reductions and risk mitigations can be achieved through acceleration of the permitting process; the sharing of research data; institution of a ‘socket-at-sea’; integrated design requirements of foundation and tower and sharing of technical information. Further improvements can be made through public-private-partnerships in which the Government plays a role in the preparation phase, preparing locations and granting permits and providing knowledge and private enterprise is left to develop the projects. More improvements can be made by international cooperation and focussing on the comparative advantage of EU Member States by optimizing the Dutch gas investments in expertise and infrastructure in combination with the renewable investments made elsewhere in Europe. The conclusions drawn from the debate are valuable and will contribute to further the development of policy and practice related to offshore wind power generation in the Netherlands.

[mappress]

Press release, February 15, 2013; Image: nortonrose