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Offshore wind on the NCS: Government press conference and public consultation

On Wednesday 9 February, four Norwegian ministers presented the government’s plans for the next steps in the development of offshore wind on the NCS. Prime Minister Jonas Gahr Støre (Labour) lead the presentation, held in Oslo Harbour. A public consultation letter was published later the same day.

PM Støre and his ministerial colleagues build on the work done by the recently defeated centre-right government lead by Erna Solberg. The Solberg Government opened two areas for development in 2020: Sørlige Nordsjø II and Utsira Nord. Sørlige Nordsjø II on the southernmost flank of the NCS is the most commercially attractive today. Because of a sea depth of approx. 60-70 meters, the area can be developed using mature technology and bottom-fixed wind turbines. Norwegian industry has indicated that this area can be developed on commercial terms, if the power can be delivered to continental Europe or the UK.

At the press conference on 9 February Prime Minister Støre made clear that the first 1500 MW to be developed from Sørlige Norsjø II must be built with a connection to mainland Norway alone. No connection to other countries will be allowed, including so-called hybrid solutions, entailing a combined connection to Norway and a foreign country. The question of a hybrid connection from Sørlige Nordsjø II has been heatedly debated for months.

BULLET-POINT SUMMARY

Sørlige Nordsjø II

  • The area will be divided into three areas of 1500 MW each.
  • A phased approach was indicated at the press conference:
  • Phase I: 0-1500 MW. To be developed with a connection to mainland Norway alone. The full area will be divided into smaller bid zones, and allocated through competitive auctions. No specifics or details regarding the envisaged allocation mechanisms and economic support schemes have been shared so far. Based on statements in the press conference it can be expected that support schemes will be introduced, with a scope that could include support for grid infrastructure from the area to mainland Norway. The Ministry of Petroleum and Energy (“MPE”) will develop the models over the next months. Proposals for changes to the Ocean Energy Act and the corresponding regulation are expected before Summer 2022.
  • Phase II: 1500-3000 MW. Hybrid/foreign grid connections are still on the table. Norwegian regulatory authorities have been asked to analyse the potential hybrid/foreign grid connection alternatives. The government will later decide on whether this will be allowed for Phase II.
  • The MPE recommends starting with two of the three geographic areas, and asks for feedback with respect to which two area to be chosen first.

Utsira Nord

  • The MPE are proposing two alternatives for the division of the are into smaller bid zones.
  • Alternative I: Four bid zones in total. Two zones for up to 500 MW each, and two zones for up to 250 MW each.
  • Alternative II: Thee bid zones. Two zones for up to 600 MW each, and one zone for up to 300 MW.

New offshore wind areas

  • Regulatory authorities have been asked to start the process of identifying new offshore areas suitable for development.
  • If identified and recommended, the opening of new areas will be done through a royal decree adopted in a formal cabinet meeting.

Arntzen de Besche’s energy department is assisting clients with all aspects of the development of offshore wind projects on the NCS, including regulatory and strategic advice, finance and tax. We offer specialist insight into the legal, commercial and political drivers of the rapidly emerging and fast-growing Norwegian offshore wind market.