Offshore wind update – the first phase of Sørlige Nordsjø II will not be developed as a hybrid project
In 2020 the areas Utsira Nord (up to 1,500 MW) and Sørlige Nordsjø II (up to 3,000 MW) were the two first areas opened for development of offshore wind in Norway. In the public hearing for the guide for the application process and amendments to the Offshore Energy Act and ancillary regulations, offshore wind developers emphasised the importance of hybrid cables for the development of Sørlige Nordsjø II to be profitable. Furthermore, it was also raised concerns related to an auction-based licensing process for Sørlige Nordsjø II due to the lack of maturity of legal framework and unclarities related to the Sørlige Nordsjø II license area.
In a press conference on 9 February 2022, the government announced the following updates to the Norwegian offshore wind initiative:
The first development phase of Sørlige Nordsjø II will not be a hybrid project
The development Sørlige Nordsjø II will be divided into two phases whereas the first phase of 1,500 MW will be developed without interconnectors and not as a hybrid project. The first phase of Sørlige Nordsjø II will be connected to the Norwegian onshore grid by radials. In the press conference securing low Norwegian electricity prices and securing electricity for the Norwegian industry were mentioned as the reasons for excluding a hybrid project in Sørlige Nordsjø II. Although it was acknowledged that it most likely would require governmental subsidies to develop the first phase of Sørlige Nordsjø II not as a hybrid project, no further information on subsidy schemes were presented.
However, the door was not completely shut for hybrid cables in the second phase of the development of Sørlige Nordsjø II. For the second phase (also 1,500 MW) the government announced that it would review the alternatives for grid connection and the effect on the Norwegian electricity system. The investigation of alternatives for grid connection will be carried out by NVE and Statnett and is indicated to be completed during the autumn 2022. Based on the government’s reasoning for excluding hybrid projects in phase one of Sørlige Nordsjø II, it may be assumed that any conclusions in the investigation on hybrid cables’ effect on electricity prices in southern Norway will be of material importance.
The first phase of Sørlige Nordsjø II will be based on an auction-model
Disregarding certain concerns raised in the public hearing, the government confirmed that the licensing process for Sørlige Nordsjø II will be based on an auction-model. No further details were given on the structure of the auction-process, hence it remains to be seen how the final model will look like. However, it seems clear, given that hybrid cables excluded for the first phase of Sørlige Nordsjø II, that governmental subsidies will be necessary to kick-off the development of Sørlige Nordsjø II.
Dividing Sørlige Nordsjø II and Utsira Nord into smaller project areas
To avoid overlapping projects, a public hearing on a proposal from the Ministry of Petroleum and Energy’s («MPE») to divide Utsira Nord and Sørlige Nordsjø II into smaller project areas was also initiated on 9 February 2022.
For Utsira Nord MPE proposes two alternative layouts: In the first alternative, Utsira Nord is divided into four project areas with two project areas with 500 MW each and two project areas with 250 MW each. In the second alternative, Utsira Nord is divided into three project areas with two project areas with 600 MW each and one project area with 300 MW
It is also proposed that Sørlige Nordsjø II is divided into three project areas of 1,500 MW whereas only two of the project areas will be opened.
The public hearing for proposed project areas in Sørlige Nordsjø II and Utsira Nord will be concluded by end of April 2022.
Investigation of new areas for Offshore wind
It was also announced that MPE will instruct NVE to identify new areas for development of offshore wind and to prepare a proposal for an impact assessment program. It is estimated that the preparation of the proposal will take 9 to 12 months. Thereafter the impact assessment program must be completed before new areas may be opened for offshore wind.
Timeline for adopting the amendments in the Offshore Energy Act and ancillary regulations
The government announced that the amendments to the Offshore Energy Act, which was sent on public hearing in 2021, would be presented to the Norwegian Parliament by end of H1 2022. Furthermore, it was indicated that the process for awarding licenses for the project areas would be initiated during autumn 2022.