- Professional News
- 13 August 2018
New technology-neutral tenders for renewable energy in Denmark
The Danish government has decided to let new renewable energy projects compete for funds in technology-neutral tenders. The first tenders are scheduled for 2018 and 2019.
The European Commission’s approval for the subsidy scheme for onshore wind turbines (file number N354/2008) expired on 21 February 2018, while the scheme for solar power installations has also recently been sharply reduced. Therefore, in practice, it is currently not possible for owners of most types of new renewable energy installations to qualify for subsidies. However, a new technology-neutral model for public support of renewable energy has been agreed upon and is to come into force as soon as this year.
In late 2017, the Government and the Danish People’s Party reached a political agreement on “a new support model for wind and solar in 2018-2019”.
Pursuant to the agreement, a total of DKK 829m (approx. EUR 111m) is to be allocated for the new model, which includes two technology neutral tenders for renewable energy in 2018 and 2019. The model comprises solar power, onshore and offshore wind farms within the so-called Open Door area.
A broader energy political agreement was concluded on 29 June 2018 by the Government and all the parties represented in the Danish parliament, under which the model for technology-neutral tenders is to be extended from 2020-2024 by a total of DKK 4.2bn (approx. EUR 564m).
The Danish Energy Agency (the DEA) is responsible for carrying out the tenders. The final tender conditions have not yet been published but are currently available in draft form (in Danish) on the DEA’s website, along with other relevant materials. The conditions mention that tenders may result in one or more contracts being awarded subject to the allocated funds.
The subsidies under the tender are to be paid out as a price premium per kWh delivered to the Danish collective grid for a period of 20 years. The lowest bid(s) win(s). However, it is indicated that no bid exceeding DKK 0.13 (approx. EUR 0.02) per kWh will be accepted.
The winning tenderer is obligated to construct and connect the project to the grid within a certain deadline (depending on the type of installation), sanctioned by a retention penalty for which a demand guarantee must be provided.
The model with awarding subsidies through a call for tenders is not entirely new in Denmark. For large offshore wind farms (for instance the ongoing Kriegers Flakproject) subsidies have been awarded to developers under similar conditions. Bech-Bruun is highly experienced in the preparation of such projects.
While the new model has been transposed into law through amendments to the Danish promotion of renewable energy act, it has not yet entered into force. Before it may take effect, the scheme must receive the European Commission's state aid approval.
Thus, it is not clear when the official call for tenders will be issued and what the deadlines will be. However, the DEA has announced that if the EU approval is issued in due time, it intends to carry out the first of the two tenders in 2018. Otherwise, both tenders will be carried out in 2019.