Legal aspects of grids: The Dutch case

On 6 September 2013 the Energieakkoord voor Duurzame Groei (the Energy Agreement for Sustainable Growth) was signed by (semi) governmental bodies and various other industry parties. The proposal outlines the agreements for the development of renewable energy in the Netherlands. The set goals seemed ambitious and overreaching at the time and unfortunately, due to the current financial situation, the reality in 2015 is no different.

Ambitious goals

The proposal committed the government to medium and long term goals. Long term being 2050, by when the Netherlands is committed to achieving a complete climate neutral energy supply. However the question is if this is still a realistic goal even though 2050 is quite some way away. In whatever form, this goal is a noble one. The government’s medium term goals states that by 2020 14% of the total energy consumption will be sustainable and increased to 16% by 2023. To meet these goals within the energy agreement, offshore wind energy will necessarily be scaled up. This will require a minimum of 4.450W of offshore wind power to be operational by 2023. To meet this target an extra annual 700MW capacity should be realised in the next five years, in government appointed areas.

Ambition versus reality

The current generation of sustainable energy reaches 4.3 per cent and as such a drastic turn around will be necessary to reach the envisaged goals. In spite of the ambitious goals, the current statutory provisions do not point directly to enabling such a speedy realisation of the intended offshore wind farms. Furthermore, the government strives to realise a cost reduction of 40 per cent per MW for offshore wind energy. Solid statutory requirements with shorter run times and increased legal security for permit applicants are essential to be able to meet the goals. In this day and age it is not realistic to leave permit applicants in the dark for so long and certainly not when large investments are involved. Stakeholder buy-in is an important factor. Currently work is being done to realise the necessary governmental bills and corresponding regulations. Not forgetting, the Technical Codes which will also need to be amended. The practical impact on the energy industry will be substantial.

Governmental bill Wind Energy at Sea

As mentioned, a change in current regulation is necessary to be able to upscale offshore wind energy. The current bill entails an ordinance for offshore wind farms. This ordinance shows the areas where and under which circumstances wind farms may be built. Whoever wins the tender receives the permits and thus has sole rights to the installation of the wind farm.

Next to that, Dutch national grid provider TenneT is responsible for the electrical supply security, which is a hefty responsibility when speaking of the offshore grid, due to the risky long distance connections to the Dutch electricity network. The governmental bill applies to several scenarios. The grid’s permit holder is responsible for, much like the national grid operator, maintaining the network and drafting an investment plan. On the one hand this should guarantee the continual supply of electricity and all its financial consequences – on the other hand the costs must be distributed fairly. Whichever way you look at it the costs fall on the consumers.

Just at sea

Aside from regulations to allow wind farms, work is also being done to realise a judicial foundation for a grid at sea. For this the Electricity bill is used. TenneT has to prepare the electricity gird at sea, alongside the standard responsibilities of an operator. When the wind farm has been realised, TenneT will most likely also become the offshore grid operator. The wind farms will have to be connected to the Dutch grid and these wind farms, much like onshore projects, will have to sign a transport and connection agreement with TenneT.

This agreement governs the conditions to be connected to the Dutch electricity grid and it also covers an arrangement where TenneT, under strict conditions, may decrease or suspend the transport when maintenance has to be done or when the public energy supply is endangered. When the suspension has not been planned the government bill does allow compensation for damages incurred by the permit holder. TenneT however is obligated to transport the electricity and when the company is not able to, the permit holder has a right to compensation of these damages as well.

Future plans

The next years will see more activity on the North Sea. Aside from the Dutch aspect; there are also international question marks. If we realise a national grid at sea and distribute, i.e. dump, these costs for the transition to more sustainable energy generation among the citizens it seems a logical step to look towards realising an international grid. Ideally Europe should come together and create a European offshore grid. Only then will steps be taken to achieve cost optimisation. To see the advantages of such a cross border grid we have to look far into the future. Currently many European governmental regimes differ too much and not just in regards to technical properties but more so in terms of transport tariffs. To be able to realise the cross border network and to reap the rewards from large volumes, the governmental regimes will have to be coordinated. Sustainable energy generation has been a priority and when no capacity is to be reserved for cross border connections, an international connector shows no advantage. Also, it is essential for European legislation to be coordinated as well. A uniform approach and set of conditions is essential.

With thanks to Sophie Dingenen Attorney at Law at Baker & McKenzie