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In what appears to be a panic reaction to the rash of applications to build wind stations in the Dutch waters of the North Sea, economics minister Laurens Jan Brinkhorst has announced an 18 month moratorium on subsidies for new offshore developments. It is the second about-face by the Dutch government in the past half year on its offshore wind strategy and comes just five months after it lifted a licensing freeze on new applications.

A runaway renewables subsidy budget under the Milieukwaliteit Elektriciteitsproductie (MEP) program seems to be the reason for the new stop to offshore wind development. Dutch renewables production grew by 1.2% in 2004 to reach 4.5% of total power consumption. This puts the country well on route to reach its target of 9% renewables by 2010.

The rapid increase in production has left the government with a EUR 174 million shortfall in its MEP fund over the 2003-2005 period. The MEP is financed by a charge on consumer bills of EUR 52/year. It was set to rise to EUR 56 next year, but electricity customers will now have to pay EUR 100/year to cover the deficit.

To regain budget control, Brinkhorst intends to cap growth at 0.6% a year from 2005 to 2010 by imposing an MEP ceiling, freezing all awards to new large-scale biomass and offshore wind between 2005 and 2007, with immediate effect. With offshore subsidies currently pegged at EUR 92/MWh, a 350 MW offshore farm would cost EUR 100 million a year for ten years -- too much for a single project, says the minister.

Rush for the sea

In the five months since the previous moratorium was lifted, five developers have lodged 54 offshore wind farm applications for 25 sites in the Dutch Economic Exclusion Zone (EEZ).

Developer E-Connection, which has applied for ten development licenses for a total of 1200 MW, says the government is proving to be completely untrustworthy when it comes to wind. "How does this move reconcile with the national policy statement that offshore wind development is an urgent necessity of great national importance and the longstanding commitment to build 6000 MW by 2020?" asks the company's Mathieu Kortenoever.

Like many in the industry, he sees the move as a panic reaction to the surge in activity since the lifting of the moratorium. "After three years of inactivity the industry finally gets a chance to show that it is ready and willing to proceed, and the government pulls the rug out from under our feet," he says. Kortenoever also blames the offshore rush, which has caused the panic on the he government's failure to regulate the licensing system. At the same time, he criticises project developers who seem intent on staking claims to large parts of the seabed without actually intending to build new plant.

Offshore site rush

A consortium of Dutch utility Nuon and Shell, represented by WEOM, has registered start notices for eight sites with a combined capacity ranging from 2455 MW to 4587 MW. Nuon has said it is unlikely to build any more offshore projects, however, until it has gained experience with the 108 MW Near Shore Windfarm project, which is expected to start building next year.

Newcomer Raedthuys Holding -- a division of onshore wind developer and insurer Groenraedt -- has registered an interest in 14 sites, but announced plans for just a single 450 MW plant. It hopes to complete this in 2008 in association with the international certification agency Kema.

Ireland's Airtricity, the only foreign concern to have joined the site rush, has tagged nine sites, three of which are some 40 to 60 kilometres off the Hook of Holland.

On receipt of a "start notice" from a developer, the government has 13 weeks to state what information it requires in an environmental impact statement (EIS) for that site. The first party to present a completed EIS will then be given the exclusive right to apply for a building permit.

The fifth active developer, Evelop, has registered start notices for 11 sites (3900 MW) in the EEZ. The company is already involved in three other offshore activities: it is negotiating to buy the rights to develop the 120 MW Q7-WP offshore project from E-connection (“uåX˜äŠÊ˜·³Ç, May 2005); it is tendering for the 200 MW extension to the Danish Nysted plant (“uåX˜äŠÊ˜·³Ç, February 2005); and it is developing a 300 MW project at Sheringham Shoal off the east coast of Britain with sister Econcern subsidiary, Scira Offshore Energy.

Evelop's Ernst van Zuylen is more upbeat about this latest twist in the Dutch offshore tale. Because the freeze relates only to new projects, neither Nuon and Shell's Near Shore Windfarm nor Evelop's 120 MW Q7 project will be affected by the decision. Further, any project arising from the spate of new applications will be built only in 2007 at the very earliest, by which time the freeze will be over and the electricity act will have been further amended.

Evelop will continue with its efforts to arrange project finance for Q7 and will be conducting EIS studies for its 11 start notice sites, says Van Zuylen. "I sometimes see the Dutch offshore industry as a huge tanker, which the government tries to direct by placing obstacles in its course rather than by steering," he says.