In December the first tender of Borssele I and II will start: two locations for wind parks at the coast of Zeeland near Borssele with a total capacity of 700 megawatt. ‘Borssele’ is a blueprint for public tenders of numerous new wind parks. In the upcoming five years, the Netherlands will put out to tender 3,500 megawatt of wind parks. What chances and risks offers wind energy? That was the main topic of ABN AMRO’s seminar ‘The Borssele 2015 Wind Tender’ on the 2nd of September in which constructors, energy companies and financers participated.
In 2013 the Dutch government closed a National Energy Agreement with the ambition to increase the production of sustainable energy to 14% in 2020 and to 16% in 2023. This was only 4% in 2013. “These ambitious goals can only be reached if we make optimal use of all available technologies to produce sustainable energy. In the Netherlands, wind is our best natural resource for the large-scale production of energy,” stated Bert de Vries, Director Sustainability and Energy of the Ministry of Economic Affairs. “The possibilities are very promising. However, the Dutch government wants this energy source to be as cost efficient as fossil fuels. All the relevant players in the value chain are committed to achieve this goal.”
Investments in offshore wind parks
To achieve the ambitions of the Dutch government this summer an important step forward has been made. The Ministry of Economic Affairs started the first round of tenders for Borssele I and II. Doing so, the ministry defined the rules for future tenders. De Vries: “The government and the industry focus on a cost reduction of 40% up to 2020 and everybody will contribute to this goal. With this tender we lay the foundation for multi-annual investments. Moreover, we believe that competition and innovation can contribute to cost reduction.”
With the subsidy system SDE+, the Ministry of Economic Affairs encourages the development of sustainable energy in the Netherlands. The offshore wind industry can apply for this grant to invest in ‘Borssele’. There is a budget available of five billion euro. “We have a combined application form for grants and permits. Not only traditional energy companies can submit bids, sub-contractors and other European companies can participate too. The winners obtain a grant of 15 years on the electricity they produce. Moreover, they will be connected with the energy platform that TenneT will build”, stated Geert Harm Boerhave of the Rijksdienst voor Ondernemend Nederland (RVO.nl). TenneT is the Dutch Transmission Service Operator and responsible for offshore capacity. The company thinks it will need to invest four billion euro in order to connect the power network to the national distribution network. This is 40% less than the money developers of the wind park would have to spend separately. “We learn a lot from our experiences in offshore oil and gas. This is a great advantage in the development of a platform for offshore windmills,” commented Marco Kuipers of TenneT.
A home base for innovation
The Port of Rotterdam is an important player in the value chain as well, with the mission to become the main offshore hub of North-Western Europe. “We want to be the most sustainable port in the world and offshore is a major growth market. Our offshore-cluster offers all the know-how and facilities to support the most extensive and advanced offshore projects. We offer 24/7 deep sea access, a state-of-the art infrastructure and clusters of maritime and offshore companies,” stated Joost Eenhuizen of the Port of Rotterdam. “Rotterdam has the biggest fleet of floating cranes for heavy-weight lifting in Europe and our docks accommodate all sorts of offshore platforms”.
Growing into maturity
In order to build offshore wind parks, a lot of expertise as well as capital is needed. “We want to be a partner in the chain for financing offshore wind parks: from development and operations up to production and installation. Project finance enables stakeholders to share risks and the financing structure is based on long tenders with a predictable cash flow. In the last four years the market for project finance has invested 12 billion euro in European offshore wind projects,” stated Hugo Peek of ABN AMRO.
These kind of long-term investments are interesting for institutional investors as well. ”We prefer to participate in projects with a with a duration between 20 and 25 years. We are able to build on earlier experiences in Germany and the United Kingdom where we financed two offshore wind parks. The market is maturing and risk profiles are more balanced then before,” emphasized Dennis van Alphen of PGGM.
Good for the Dutch economy
It’s impressive to see the drive and commitment of The Hague to issue regulation and tenders in time. These efforts clearly include lessons learned from countries such as Germany and the UK. Moreover, all Dutch stakeholders are very well informed and have been consulted in decision-making. The result is a thought-through program with a broad base of support that will put the Netherlands on the map in offshore wind. This is not only required for achieving sustainable goals, but also for Dutch companies that will take the lead in construction and development. That is good for the Dutch economy too.