The development of offshore wind - The case of Denmark

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9 February 2017 The development of offshore wind - The case of Denmark Camilla Holbech, Deputy Manager Danish Wind Industry Association

Zooming in on the Danish wind industry More than 30,000 employees in the wind industry 11.32 billion Euro turnover in 2014 ~ 63 % exported 5.2 % of the total Danish exports come from the wind industry Denmark houses some of the most experienced, competitive and globally oriented wind companies in the world World class test facilities, easy market access, extensive expertise and unique knowledge The Danish supply chain has been strongly involved in most offshore wind farm projects in the world

World record in share of electricity consumption from wind 7000 MW Danish wind capacity and wind power share 1990-2021 % 70 6000 37,6 % in 2016 60 5000 4000 ~ 60 % by 2021 50 40 3000 30 2000 20 1000 10 0 0 Onshore Offshore Wind power share of total electricity consumption

What political framework conditions made this development possible? Several decades of long term political support for the greening of the energy supply Multi-year energy plans backed by a broad coalition of political parties. Current agreement period 2012-2020. Industry needs long term visibility with a project pipeline and market volume to be able to invest and bring down cost through competition Success requires decisions on offshore deployment based on the following elements: Government screening and identification of suitable locations. Subsidy scheme based on auction/tender processes for large scale commercial projects as well as technology demonstration projects. Development of an intelligent flexible energy system with grid infrastructure as well as a liberalized electricity market making it possible to integrate more than 40 % wind power and keeping the security of supply above 99 %.

Large scale offshore wind regulation Based on auctions / tenders on locations identified by government. The tender process ensures a competitive market based bid, that is based on the most cost competitive technologies on the specific site conditions wind conditions, depth, waves, seabed, distance to shore etc. The authorities are responsible for constructing, operating and financing the grid connection from the offshore transformer to the onshore grid, including a guaranteed deadline for grid connection. The winner of a tender is the one with the lowest bid for a feed-in-premium for the first 50,000 full load hours pr. MW. This corresponds to app. the first 10-12 years out of a concession of 25 years of operation. The feed-in-premium is a CfD as in UK and Germany. The power market price + the premium is leading to a fixed revenue in the subsidy period. The subsidy will not be given during hours with negative prices on the spot market in order to support the electricity system.

13 offshore wind farms are online. Capacity now offshore 1,271 MW. In the next 5 years 4 more offshore projects will be grid connected adding 1350 MW.

Reduction in cost of offshore wind by 48% since 2010 Further reduction in costs as worldwide capacity increases The winning bid 49.9 EUR/MWh at Kriegers Flak is the lowest costs in the world for offshore wind power so far You can t compare strike prices and cost of energy because of variation in location, price of electricity, marginal costs (returns to scale) and support scheme A tenders strike price will depend on the country-specific support scheme and general framework conditions Cost of energy (LCOE*) measures the specific wind farm s lifetime cost of electricity

Source: WindEurope

Kriegers Flak Vattenfall has set new standards for the Baltic Sea area. Proposing a price of 4.99 euro-cents/kwh, Vattenfall has been awarded the contract to build the 600 MW Kriegers Flak project, thereby having won the world s lowest bid for an offshore wind farm so far. The offshore wind turbines are capable of covering the electricity consumption of approx. 600,000 households corresponding to 23 % of all households in Denmark. Kriegers Flak will when fully operational provide 7% of the electrity produced in Denmark. Approximately 10.000 jobs will be created constructing Kriegers Flak.

Forecast for post-2020 New Energy Agreement for the period post-2020 to be initiated politically in 2017. Government platform sets the aim that 50 pct. of the energy consumption has to come from renewabels in 2030. And that Denmark strives to be the first country in the world where offshore wind can run on market terms. Screening of the North Sea and the Baltic Sea for future locations for offshore wind to ensure the basis for continued deployment post-2020.

Baltic Offshore Wind Declaration To be inspired by the North Seas declaration on more collaboration and convergence of regulatory framework conditions. Could be important lever for offshore development in the Baltic Sea. Cooperation to have two goals: facilitating the cost-effective deployment of offshore renewable energy, in particular wind promoting interconnection between the countries in the region. Idea for the Estonian Presidency of the Council in 2017?

Backing slides

Using a one-stop shop approach Denmark has succeeded in creating a one-stop shop approach where all decisions regarding offshore planning are handled and coordinated by the Danish Energy Agency. Ensures that potential bidders for offshore wind farms will only have to deal with one authority. Purpose: Increase competition by allowing for actor diversity Lower risk Speed up process Fewer transaction costs Ultimately helps to lower the bidding price Content: Geotechnical and geophysical analyses of site MetOcean studies Environmental Impact Assessment and ensuring the consents from different authorities to build and connect to the grid

Procedures for offshore wind Tenders and open-door Technical and economic criteria for the applicants Three steps in licensing procedure: - 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 given number of years, and an approval for electricity production. (given if conditions in license to establish project are kept) The 3 licenses are given successively for a specific project, and if the project can be expected to have an environmental impact an EIA must be carried out. This has been the case for all the existing Danish offshore wind farms. Negotiated tender with prequalification round In addition to public tenders a so-called open-door procedure exists, where the project developer takes the initiative to establish an offshore wind farm of a chosen size in a specific area