Draft legislative bill will abolish feed-in tariff compensation for future offshore wind farms
The draft legislative bill, which is expected to enter into force on 1 July 2024, will abolish the price supplement that offshore wind developers can receive as compensation for payment of the feed-in-tariff. The compensation option is expected to be abolished with effect for future tendered offshore wind farms.
Abolition of compensation for feed-in tariff for future offshore wind farms
Pursuant to the Act on Promotion of Renewable Energy (the RE Act), various price supplements are granted for electricity generated by facilities that use renewable energy sources. At present, under the RE Act, it is possible for offshore wind developers to receive support in the form of a price supplement corresponding to the feed-in tariff that the developer must pay for the transfer of electricity to the grid.
The draft legislative bill proposes to abolish the opportunity of price supplements in the form of compensation for feed-in tariff with effect for future offshore wind farms.
It is proposed that in the future, only the facilities specifically mentioned in the RE Act will be able to receive price supplements. More specifically, it is going be Horns Rev 2, Rødsand 2, Anholt, Horns Rev 3, Vesterhav Syd, Vesterhav Nord, Kriegers Flak and Thor that will be entitled to a price supplement corresponding to the payment according to the feed-in tariff fixed from time to time in the future.
In the future, developers will thus not be entitled to receive price supplements in relation to future tendered offshore wind farms.
The change of the compensation rules aims to create transparency around the subsidy payments and to give equal status to onshore and offshore based renewable energy facilities.
The Danish Ministry of Climate, Energy and Utilities expects that the increased costs for developers will ultimately be covered by the state, as it is anticipated that the proposed abolition of the compensation will be reflected in the bid price for the upcoming tenders for offshore wind farms.
The draft legislative bill is a follow-up on the Danish Climate Agreement for Energy and Industry of 22 June 2020, where it was definitively agreed to abolish compensation for the feed-in tariff for future offshore wind farms.
Clarification of the use of Danish law on facilities within the scope of the RE Act in the exclusive economic zone
The draft legislative bill also proposes to clarify the use of Danish law to installations and facilities, such as offshore wind turbines and other renewable energy facilities, in the exclusive economic zone. It is proposed that the RE Act should state that Danish law applies to facilities within the scope of the RE Act in the exclusive economic zone, subject to the limitations arising from international law.
The draft legislative bill also clarifies that cases arising from matters or incidents on facilities within the scope of the RE Act in the exclusive economic zone must be brought before the court nearest to the natural coastal point closest to the specific facility.
The reason for the change is the increasing interest and need to install renewable energy facilities in the territorial waters and in Denmark's exclusive economic zone, which has led to a need to clarify the rules that apply in the exclusive economic zone. The purpose of the draft legislative bill is to create this legal framework, which has been requested by, among others, the offshore wind industry.
The purpose is also to ensure a clear and unambiguous legal position regarding other legislation, such as the rules in the Danish Administration of Justice Act regarding enforcement, which may be of importance to developers of renewable energy facilities in the exclusive economic zone, among other things, in relation to the financing of these facilities.
The draft legislative bill is undergoing a hearing until 27 November 2023 and is therefore awaiting the proposal of the bill.
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