The establishment of offshore wind turbines can follow a tender procedure run by the Danish Energy Agency or an open-door-procedure. The two different procedures for the establishment of offshore wind turbines are described below along with a description of the Danish legislation regarding the establishment wind turbines.
The conditions for offshore wind farms are defined in the Promotion of Renewable Energy Act . In chapter 3 it is stated that the right to exploit energy from water and wind within the territorial waters and the exclusive economic zone (up to 200 nautical miles) around Denmark belongs to the Danish State.
Thus, three licenses are required to establish an offshore wind farm in Denmark. The three licenses are granted by the Danish Energy Agency, which serves as a "one-stop-shop” for the project developer. The three licenses are stated below:
- License to carry out preliminary investigations
- License to establish the offshore wind turbines (only given if preliminary investigations show that the project is compatible with the relevant interests at sea)
- License to exploit wind power for a certain number of years, and an approval for electricity production (given if conditions in license to establish project are kept).
The three licenses are given successively for a specific project. Furthermore, it is necessary to perform an Environmental Impact Assessment (EIA) if the project is expected to have an environmental impact. So far, it has been necessary to perform an EIA for all of the existing Danish offshore wind farms.
The specific procedure for the EIA regarding offshore wind farms is described in Executive Order no. 68 of January 26th 2012 . Furthermore, the Danish Energy Agency has guidelines developed for the elaboration of EIA for offshore wind proposals. The guidelines only cover issues related to the environment at sea.
As previously mentioned, the establishment of offshore wind turbines can follow a tender procedure or an open-door procedure. For both procedures, the project developer must obtain all three licenses.
Most new offshore wind farms in Denmark are established after a tendering procedure to realise new offshore wind farms at the lowest possible cost. All tenders are decided in political energy agreements.
The Danish Energy Agency announces a site specific tender for an offshore wind farm of a specific size, e.g. 200 MW. The offshore wind farm has to be established within a geographical area which is defined in the tender.
The Danish Energy Agency have e.g. invited applicants to quote a kWh price in the form of a fixed price at which the bidders are willing to produce a certain amount of electricity corresponding to a certain number of full-load hours. The owner of the wind farm will have to sell the electricity at the market, and get a subsidy to cover the difference from the market price to the fixed bid price.
The winning price will differ from project to project. Thus, the result of a tender depends on the project location, the wind conditions at the site, the competitive situation in the market at the time, etc.
In tenders for large scale offshore wind farms, Energinet.dk constructs, owns and maintains both the transformer station and the underwater cable that carries the electricity to land from the offshore wind farm. Energinet.dk is responsible for the electricity infrastructure in Denmark and act as an independent system operator (TSO).
In the open-door procedure, the project developer takes the initiative to establish an offshore wind farm. The project developer must submit an unsolicited application for a license to carry out preliminary investigations in the given area. The application must as a minimum include a description of the project, the anticipated scope of the preliminary investigations, the size and number of turbines, and the limits of the project’s geographical siting. In an open-door project, the developer pays for the grid connection to land.
An open-door-project cannot expect to obtain approval in the areas that are designated for offshore wind farms in the update of the report Future Offshore Wind Power Sites from 2011.
As part of the one-stop shop concept, Danish Energy Agency initiates a hearing of other government bodies to clarify whether there are other major public interests that could block the implementation of the project before the Danish Energy Agency actually begins processing an application. Based on the result of the hearing, the Danish Energy Agency decides whether the area in the application can be developed, and in the event of a positive decision it issues an approval for the applicant to carry out preliminary investigations, including an EIA.
If the results of the preliminary investigations show that the suggested project can be approved, the project developer can obtain a licence to establish the project.
Electricity produced by wind farms under the open-door-procedure will receive a price premium at the same level as onshore wind turbines. The premium is 25 øre/kWh on top of the market price. If the market price added to the subsidy exceeds 58 øre/kWh the subsidy will be reduced accordingly.