KEF, Alm.del - 2023-24 - Bilag 98: Henvendelse af 30/11-23 fra OX2 om forslag til en åben dør 2.0-udbudsmodel for havvind i Danmark

Klima-, Energi- og Forsyningsudvalget 2023-24
KEF Alm.del Bilag 98
Offentligt

Open Door 2.0

A supplementary model built on the principles of the original Open Door model and designed to sit

alongside Denmark’s

public tenders. Open Door 2.0 places emphasis on pace, scale and keeping the

seabed open for a broader range of potential developers.

Contact:

OX2 Denmark

Tue Lippert

[email protected]

Phone: +45 53880188

KEF, Alm.del - 2023-24 - Bilag 98: Henvendelse af 30/11-23 fra OX2 om forslag til en åben dør 2.0-udbudsmodel for havvind i Danmark

Contents

Resumé (in Danish)

Executive summary

Section 1:

Background

–

why is there a need for Open Door model 2.0?

Section 2:

Design criteria

–

what should Open Door model 2.0 help achieve?

Section 3:

An overview of the Open Door model 2.0

Section 4:

Evaluation criteria

–

how will projects be selected?

Section 5:

Detailed overview of the profit sharing process

Section 6:

Comparing Open Door model 2.0 to other models

–

what are the key differences?

Section 7:

Conclusion and summary

KEF, Alm.del - 2023-24 - Bilag 98: Henvendelse af 30/11-23 fra OX2 om forslag til en åben dør 2.0-udbudsmodel for havvind i Danmark

Resumé

Der er sket store ændringer for havvindssektoren i Danmark inden for det seneste år, heriblandt

suspenderingen af Åben Dør-ordningen. Udviklere af offshore wind (OSW) kunne efter først til mølle-

princippet opføre OSW-projekter på dansk havbund, men ordningen blev suspenderet på grund af

usikkerhed om, hvorvidt den levede op til EU’s konkurrenceregler. Suspenderingen af ordningen har

betydet, at størstedelen af de 33 Åben-dør-projekter (23GW), der allerede var under udvikling, nu er

annulleret, og Danmarks potentielle OSW-kapacitet har lidt et betydeligt tab.

Regeringen har forsøgt at imødekomme dette tab ved at annoncere et nyt statsligt udbud af OSW. I denne

ordning vil staten have en ejerandel på 20% af enhver udbudsvinders projekt, undtagen på Energiø

Bornholm. Selvom det statslige udbud potentielt kan bidrage med 9GW inden 2030, er det stadig en

betydelig udfordring at nå op på de 23GW, som var i udvikling under Åben-dør-ordningen. Nationale

klimamål og nye internationale aftaler fra 2022 og 2023 betyder, at regeringen er under pres for at levere

en betydelig etablering af ny grøn energi.

Det foreslås derfor at identificere en alternativ ordning for tildelingen af OSW-projekter, som giver

udviklere adgang til havbunden samtidig med at sikre overskudsdeling med staten. Den nye model for Åben

Dør vil være et supplement til de statslige udbud og dermed hjælpe regeringen med at nå sine klimamål.

Nøgleprincipperne for Åben Dør 2.0, der skal lempe barriererne for at opføre OSW i Danmark, er:

•

At tillade åben adgang -

Udviklerne af OSW vil stå for udvælgelse og forundersøgelse af

havarealer inden for rammerne af Danmarks havplan.

At dele overskuddet med staten og sikre diversitet blandt udviklere -

Modellen erstatter

kravet om store forhåndsbetalinger med et krav om overskudsdeling med staten, når

vindmølleparken er gået i drift og genererer overskud. Dette åbner for at mindre, men

kompetente udviklere, kan få adgang til det danske marked, samtidig med at staten er sikret

indtjening fra brugen af havbunden.

At begrænse den administrative byrde -

Modellen vil fritage myndighederne fra en stor del af

den administrative byrde og i stedet lægge den på udviklerne. Dette vil bidrage til at forkorte

processen med at opføre OSW.

At prioritere store projekter -

Udviklere vil blive tilskyndet til at opføre store OSW-projekter for

at udnytte de tilhørende fordele ved projekter i stor skala i form af hastighed og kapacitet.

KEF, Alm.del - 2023-24 - Bilag 98: Henvendelse af 30/11-23 fra OX2 om forslag til en åben dør 2.0-udbudsmodel for havvind i Danmark

Executive Summary

Over the past year there have been large changes to the offshore wind sector in Denmark, including the

suspending of the Open Door model. The model allowed first come, first served access for developers to

develop certain areas of the Danish seabed for offshore wind (OSW), and at the time of suspension had 33

projects (23GW) in its pipeline, the majority of which have since been cancelled. The suspension was due to

anxiety

about the model’s robustness in relation to EU competition law,

and has resulted in a considerable

loss of potential OSW capacity in Denmark.

The Government’s response has been to announce new OSW targets that will be delivered through a

public

tender model. All projects accepted under this model (except Energy Island Bornholm) will be partially

owned by the State, who will take a 20% minority stake in each project. Although these projects will help to

ensure that 9GW of capacity can be delivered before 2030, there remains a considerable challenge in

closing the gap to the 23GW, which the Open Door model had in its pipeline. National climate targets and

new, international agreements signed in 2022 and 2023 mean that the Government is under pressure to

deliver significantly on establishing new green power.

It is therefore proposed to identify a new alternative model that grants developers access to seabed, but

takes a profit sharing mechanism with the State into account. The new Open Door model is established to

function alongside the public tenders, and can help close the gap and enable the Government to

successfully meet its climate goals.

The key principles of the Open Door model 2.0 is to reduce the barriers for developing offshore wind in

Denmark by:

•

Enabling an open access approach

–

The model places site selection and pre-assessment

requirements on the developers within the boundaries outlined in Denmark’s Marine Spatial

Plan.

Giving potential upsides for the State, whilst encouraging developer diversity

–

The model

removes the need for large upfront payments from the developers in exchange for using the

seabed. Instead, compensation to the State is shifted to after the wind farm has started to

operate and is generating revenue.

Limiting the additional administrative burden

–

The model aims to limit the requirements on

government entities and other public authorities, which will also help to increase pace of

development.

Prioritising larger wind farms

–

The model aims to encourage developers to submit larger wind

farms with the included large-scale benefits and thereby implementing speed and scale in the

model.

KEF, Alm.del - 2023-24 - Bilag 98: Henvendelse af 30/11-23 fra OX2 om forslag til en åben dør 2.0-udbudsmodel for havvind i Danmark

Section 1: background

–

why is there a need for Open Door model 2.0?

Key developments in the offshore wind sector in Denmark

Throughout 2023 there have been large changes in the Danish offshore wind sector. At the beginning of the

year, the Danish Government announced the suspension of the Open Door scheme, which had been in

operation since 1999. The suspension resulted in 33 offshore wind projects being put on hold, totalling

almost 23GW of green power capacity. The reason for the suspension was due to anxiety about the model's

robustness in relation to EU law and the legality of the ‘first come, first served’ principle that underpinned

the entire scheme. After further investigation, only 9 of the 33 projects have been able to continue into

development.

Despite this, the Danish Government is under pressure to deliver on offshore wind, not only to support

national climate targets, but also to fulfil international agreements. Denmark aims to operate on 100%

green power by 2030, with a large proportion of this

supplied by wind power. The Danish Energy Agency’s

latest ‘Klimastatus og fremskrivning’ memo indicates that by 2035, wind has the potential to account for

almost 65% of power produced. Likewise, on the international stage, the Danish Government outlined in

the memo ‘Danmark Kan Mere II’, that Danish offshore wind will play a large role in Europe’s

decarbonisation pathway. In 2022, Denmark signed the

‘Esbjerg

agreement’, a joint agreement with

Germany, The Netherlands and Belgium, which aims to develop 65GW of offshore wind capacity in the

North Sea by 2030, and a total of 150GW by 2050.

To support these commitments, a majority of the Danish political parties made an agreement in May 2023

to deliver 9GW offshore wind by 2030 through public tenders. This includes 6GW of newly defined seabed

areas, as well the 3GW Energy Island Bornholm. The tenders are set to run between the end of 2024 and

the start of 2025. They will include a unique state ownership model in which the Danish State becomes a

minority owner (taking a 20% stake) of the projects.

Although these announcements of the public tenders should support the capacities needed to deliver on

the 2030 targets with the proposed over-planting and direct connection to PtX, the Danish Government will

need to ensure that green power supply can continue to keep up with demand. The green transition will

put increased pressure on the power network, with the transition to Electric Vehicles (EVs) and the

decarbonisation of heat. Furthermore,

Denmark has signed a new ‘Joint Declaration of Intent’ with

Germany aiming to deliver significant volumes of green hydrogen. All of these initiatives are aligned with

Denmark’s ambition to reach upwards of 4-6GW

of electrolysis capacity by 2030, requiring access to more,

cheap wind power beyond the new capacities outlined in the public tenders.

In support of a new Open Door model

A more agile model that can sit alongside the public tenders will be critical to support the goals outlined

above without burdening the Danish authorities and public entities too much.

Although there are many upsides to the public tender models, there are also certain shortcomings that a

market driven tender model can help to address. Firstly, there remains large undeveloped areas of the

seabed. This is reflected in the 24 Open Door projects that were cancelled, but also indicated in the Danish

Marine Spatial Plan, which includes large areas of un-designated seabed zones. Furthermore, the minimum

requirements laid out in the tender materials only enable a small group of the relevant renewable

KEF, Alm.del - 2023-24 - Bilag 98: Henvendelse af 30/11-23 fra OX2 om forslag til en åben dør 2.0-udbudsmodel for havvind i Danmark

developers to participate. These groups tend to be the larger, global players who have the capital reserves

necessary to pay the upfront costs associated with leasing the seabed. The state ownership model and

public tender process also place a high administrative burden on the Danish Energy Agency (DEA) and the

sector.

A new and revised Open Door model complementing the public tenders will help to ensure that the Danish

seabed remains an area for accelerated expansion of green energy that can empower those developers,

who are looking to use innovative approaches.

Removing the requirements for large upfront payments to lease the seabed during planning phases will

help to enable smaller, more agile developers to participate. This will help diversify the development of

seabed, spreading risk from a handful of actors to a broader range of developers. Remuneration for the use

of the seabed could instead be postponed until the wind farm is generating considerable revenues and

consist in parts of the profit. This is an important point to emphasise given the current challenges faced by

the sector from resource constraints, and rising costs of raw materials and capital due to high inflation, the

fallout from COVID-19 and the energy crisis.

A simpler application and evaluation process will also help to reduce the administrative time required by

the DEA. In addition, an emphasis on supporting the green hydrogen agenda rather than requiring a

connection to a highly stained power grid will also help lowering the burden on Energinet and public

entities, and accelerate development timelines.

This memo lays out a detailed overview of the key principles of an Open Door 2.0 model and provides a

demonstration of the possible upsides the Danish State could gain from Open Door 2.0 offshore wind

projects. The insight gained from this memo could serve as useful knowledge for the Government in their

investment into further facilitating the green transition.

KEF, Alm.del - 2023-24 - Bilag 98: Henvendelse af 30/11-23 fra OX2 om forslag til en åben dør 2.0-udbudsmodel for havvind i Danmark

Section 2: Design criteria

–

what should Open Door model 2.0 help achieve?

The design of the Open Door model 2.0 is based on a number of key criteria to ensure that the model can

successfully address the key points set out in Section 1.

The model’s design will help address the specific shortcomings of the original Open Door model

. The eight

design criteria are outlined in Figure 1 below.

Figure 1: Design criteria used to guide the design of the Open Door model 2.0

Detailed overview of the eight design criteria

1. Enable profit sharing

Since the Danish seabed is a public resource, developers should not freely be able to exploit it

without providing a benefit back to the State and the Danish public. Conversely, developers should

be able to earn sufficient profits on the wind farms they construct and operate. Therefore, the

model should be designed in a way where profit can be shared between the developer and the

Danish State. Sharing profits after the wind farm starts operating instead of requesting a large

upfront fee ensures that a wider range of market players can participate, including smaller

developers who can deliver in a faster and more agile way.

2. Promote speed and scale

The new model should be designed in a way that encourages developers to design offshore wind

projects that can be delivered at pace. This can partially be achieved by providing incentives for

developers to meet certain milestones within set timescales, but also by reducing administrative

hurdles and bottlenecks. In addition, the model should also favour and promote the development

of larger wind farms. This can be achieved through design criteria #1, which, through economies of

scale, will mean that larger projects can generate higher profits faster. Embedding size as part of

This includes considerations for the EU’s state aid rules, however Open Door model 2.0 has not yet been evaluated

from a legal perspective.

KEF, Alm.del - 2023-24 - Bilag 98: Henvendelse af 30/11-23 fra OX2 om forslag til en åben dør 2.0-udbudsmodel for havvind i Danmark

the evaluation criteria when choosing between two different projects for an overlapping area will

also help to achieve this. Speed and scale are both important factors to consider given the

accelerated pace of renewables build-out needed to achieve net zero in Denmark and the political

ambition of becoming an exporter of green hydrogen.

3. Reduce the burden on the Danish authorities

The new model should be designed to ensure only limited resource requirements will be needed

from public entities, such as the DEA and Energinet. Designing a model that has a simple evaluation

process will help reduce any additional burdens. Thus, ensuring that time is effectively managed

will be beneficial. Containing the application process within a certain period of time can indeed

help with reducing the burden on the Danish authorities.

4. Embed a fairer approach to sharing macroeconomic risks

Unpredictable or uncontrollable macroeconomic risks should be shared between the developer and

the

State. This helps to reduce the developer’s risk premium, therefore enabling a lower cost of

borrowing when funding the upfront capital costs required to develop and construct a wind farm.

This is likely to benefit Denmark in the long run as it will help to increase profits and probably

result in the developer being more willing to share a larger percentage of profits.

5. Ensure open access to the seabed

One of the great successes of the original Open Door scheme was the underlying principle that any

developer had equal opportunity to submit an application to develop a portion of the Danish

seabed. Open Door 2.0 continues to promote this notion. The areas of seabed open to

development should be undesignated and follow plans laid out in the new Marine Spatial Plan.

6. Encourage developer diversity

The model should be designed in a way that encourages diversity amongst the developers

constructing and operating wind farms on the Danish seabed. To ensure that Danish offshore wind

is not taken over by a few, dominating operators, the model should be designed in a way that

encourages diversity amongst the developers. By doing so, the model can reduce risk and ensure

healthy business development as well as fostering opportunities for continued innovation within

the sector.

7. Provide exclusivity for chosen developers

Developers, whose applications are selected, should gain exclusivity over the specific area of

seabed that they have applied for a defined period of time. Exclusivity will help to reduce the risk

for the developers as they develop their projects and it should likewise increase the incentives

among other developers to apply in the future. It is important that once exclusivity has been

granted, the model should be designed in a way that prevents inefficiencies from forming and

instead continues to incentivise and reward pace. The aim is to ensure rapid development and

build-out of the selected projects. As known from the public tenders, the authorities can add

penalty schemes for companies that are awarded exclusivity but do not use it.

KEF, Alm.del - 2023-24 - Bilag 98: Henvendelse af 30/11-23 fra OX2 om forslag til en åben dør 2.0-udbudsmodel for havvind i Danmark

8. Limit requirements on Energinet and the electricity grid

As well as preventing a large administrative burden on public entities for running the process, the

model should also prevent unnecessary large capex requirements being placed on Energinet and

the electricity grid. Large additional volumes of offshore wind will need to be connected to the grid,

and possibly result in the need to increase grid capacities in certain areas. Projects that limit these

requirements should be prioritised

. For example, wind farms could be directly connected to a PtX

plant rather than connected to the power grid. The developer should be responsible for both the

offshore and onshore assets related to the wind farm, including transformers and cables, as this

will also limit the burden on Energinet.

Section 3: An overview of the Open Door model 2.0

The Open Door model 2.0 is an annual, open tender process that has been specifically designed to meet the

design criteria outlined in Section 2.

Under an annual open tender process, it will be possible for a wide range of national, regional and global

offshore wind developers to bid for any area of Denmark’s available seabed. Developers commit to paying

percentage of their annual profits above a certain threshold, starting at an agreed point in time after

commissioning, in exchange for access to the seabed. For the purpose of this memo, the grace period is set

to 10 years from the commissioning date. The proposed model is outlined below in Figure 2.

Figure 2: Outline of the key process steps that make up Open Door Model 2.0

Detailed overview of the Open Door model 2.0 process steps

1. Site selection and pre-assessment

Developers will produce their independent survey of the available areas of the Danish seabed to

identify a site that they are interested in pursuing to develop a wind farm. The developer will then

Within the boundaries of EU legislation Energinet can be excused from obligations to secure enough capacity to

bring the wind farms production to the grid

KEF, Alm.del - 2023-24 - Bilag 98: Henvendelse af 30/11-23 fra OX2 om forslag til en åben dør 2.0-udbudsmodel for havvind i Danmark

perform a preliminary site assessment to determine its potential capacity and size, identify any

technical considerations, and build an initial business case to determine potential revenue

generation over the lifetime of the wind farm. The pre-assessments are performed independently

and without the support of the DEA.

2. Application and submission

The application process for Open Door model 2.0 takes place on an annual basis. The reason for

this is to limit the burden on DEA resources, to support a more predictable estimate of time

requirements, and to generate a higher likelihood for competition in the higher-value locations. To

apply, the project must satisfy several minimum requirements. This is to ensure that all projects

submitted can create value for the state, and to limit efforts spent on evaluating projects that have

not been seriously considered or thought through. A limit to how many applications (or GW) each

company can participate in and submit in an annual process can be considered and potentially

included. A key element and a minimum requirement to the application, is the percentage of profit

the developer is willing to share with the state and the total amount of revenue the wind farm is

expected to generate. The profit-sharing percentage that is submitted in the application is final and

cannot be amended.

3. a)

–

Evaluation by the DEA

Once the application has been submitted, the DEA will evaluate all the applications that have been

received to ensure that the minimum requirements have been met. Any applications that are

submitted outside of the annual application window or do not meet the minimum requirements

will be rejected. All projects that satisfy the minimum requirements will be accepted unless there

are two applications competing for the same area or overlapping area of the seabed. Where this is

the case, further evaluation will take place to identify the winning project. Further information on

the minimum requirements can be accessed in Section 4.

3. b)

–

Competitive process for multiple submissions of same seabed area

Where there are two or more applications for the same area of the seabed or overlapping areas of

the seabed, a competitive process will be initiated. A predefined set of evaluation criteria will be

used by the DEA to make a decision on which project should be granted exclusivity in an area. The

primary evaluation criteria should be based on the amount of profit the state is expected to receive

throughout the life cycle of the wind farms. However, it may be prudent for the DEA to consider

other criteria, such as speed and size, etc., which are also important for Denmark’s national climate

targets. Running only an annual process is expected to encourage higher competition and better

quality in the submitted bids over the most sought-after sites. As the process continues, the

number of available sites will decrease, which will further increase competition. Higher competition

will lead to larger amounts of revenue for the state to reinvest into facilitating the green agenda, as

developers are willing to share a higher percentage of their profits to secure the most valuable

sites. Further information on the evaluation criteria can be accessed in Section 4.

4. Successful applications granted exclusivity

KEF, Alm.del - 2023-24 - Bilag 98: Henvendelse af 30/11-23 fra OX2 om forslag til en åben dør 2.0-udbudsmodel for havvind i Danmark

Developers with successful applications will be awarded exclusivity over the seabed area they will

develop for a given period of time. This means that no other developers can subsequently bid for

some or all of this area.

5. Planning and development

Once exclusivity is granted, developers should be quick to start the execution of their agreed plans.

They should be working to their agreed timelines submitted to the DEA, which formed part of their

application process. Developers who are not able to meet their timelines without mitigating

circumstances may lose their exclusivity rights and the seabed will again be available to bid on in

subsequent application rounds. Also, penalties for not meeting development plans or bonus/malus

structures can be included in the terms. Alternative consequences may also be explored. The

reason for a focus on meeting milestones is to ensure that the seabed is developed at a pace that

can support Denmark in meeting its climate targets and to prevent any exploitation of the Open

Door model 2.0.

6. Final Investment Decision (FID)

Construction of the wind farms begins. Developing an OSW represents a huge investment decision,

and it is therefore customary among developers to have a formal internal process leading up to the

Final Investment Decision with the Board of directors.

7. Commissioning

The wind farm reaches commissioning and goes into operation. The grace period of no profit

sharing begins. The developer keeps all revenue, recuperating the investments made during the

planning and construction phases.

8. Profit sharing begins

10 years from the commissioning date (the grace period), the developer will begin to share the

agreed percentage of profit with the State on an annual basis. The sharing of profit only applies

once the developer has exceeded a certain profit threshold each year. This threshold is predefined

by the Danish Government and can be dependent on interest rates and risk metrics. The profit-

sharing continues until the wind farm is decommissioned. Further information regarding the profit-

sharing process is outlined in Section 5.

Section 4: Evaluation criteria

–

how will projects be selected?

As dictated by the design criteria in Section 1, the evaluation process must not create a considerable

burden on the DEA. All projects should be accepted as long as they meet certain minimum requirements.

These minimum requirements should be defined by the DEA. Where more than one application is made for

the same seabed area, the projects will be evaluated against a set of evaluation criteria.

1. Minimum requirements

To be defined by the DEA but follow below evaluation criteria and factors. It is proposed that the

DEA include a requirement that will prevent no or very low-profit sharing from taking place.

KEF, Alm.del - 2023-24 - Bilag 98: Henvendelse af 30/11-23 fra OX2 om forslag til en åben dør 2.0-udbudsmodel for havvind i Danmark

2. Evaluation criteria where competition exists

The primary factor for consideration is the amount of revenue the state will receive through the

profit sharing of the proposed projects. Other criteria could also be taken into account to ensure

that the

projects align with Denmark’s national climate goals. Alternatively, these other factors

could also be used to inform the minimum requirements. An overview of these is provided below:

Figure 3: overview of proposed evaluation criteria and considerations

Primary evaluation criteria:

•

Profit sharing -

The project that will result in the highest amount of revenue for the state

should be favoured. Both the total expected profit and the profit-sharing percentage should be

considered.

Other optional considerations for DEA to take into account when defining the minimum

requirements (phase 3A) or evaluation criteria (phase 3B):

•

Delivery timeline

- Projects that can be deployed at a pace and with a commissioning date

before 2030 should be favoured to help meet national climate targets.

Size (capacity) -

Larger projects with higher capacity should be favoured to obtain economies of

scale and unlock efficiencies.

Carbon footprint -

Projects that can be delivered with a lower carbon footprint over the entire

project lifetime (e.g., materials, construction methods, efficient operations etc.) should be

favoured.

Natural environment and biodiversity -

Efforts should be made to limit the environmental

impact by favouring projects with the least negative and biggest positive impact on the natural

environment and biodiversity.

•

KEF, Alm.del - 2023-24 - Bilag 98: Henvendelse af 30/11-23 fra OX2 om forslag til en åben dør 2.0-udbudsmodel for havvind i Danmark

•

Societal considerations -

Projects should contribute positively to society, by considering factors

such as social provisions and anti-corruption. Projects that support the use of local components

and local job creation may also be favoured.

Development of Denmark’s PtX market

- Projects that can demonstrate that they support PtX

build-out in Denmark and can ease the load on Energinet to minimise costs for grid

reinforcement should be prioritised.

Security

- Projects that support effective security considerations should be prioritised, e.g.,

surveillance and protection of the critical infrastructure integrity, infrastructure redundancy,

monitoring, cybersecurity, etc.

•

Section 5: Detailed overview of the profit-sharing process

The most important evaluation criteria in the case of competition is the amount of profit that will be shared

with the state. The DEA may also wish to embed a minimum profit-sharing percentage as part of the

minimum requirements for submission. The key principles of this element of the model are outlined below

and in Figures 4 and 5:

•

The developer is responsible for all costs (devex, capex, opex, abex) associated with the wind farm

throughout its entire lifecycle.

The developers receive a set ‘grace period’ from the point of commissioning. The grace period is a

period of time where the developer may receive 100% of the revenues generated by the wind farm. It is

recommended that the grace period should be set to 10 years, however, this can be changed.

After the 10-year grace period, the developer shares the profits generated within each subsequent year

of operation with the state. Each year, the profits above a certain threshold will be shared. Profit

generated up to this point is referred to as the ‘non-sharing profit amount’, which the developers can

keep 100% of. This profit will conceptually remunerate lending capital in the project. Profit generated

above this threshold will be shared with the state at a percentage rate chosen by the developer (e.g.,

50%). The threshold of non-sharing profit is to be defined by the Danish Government. See Figure 4 for

further details.

At the point of submission, the developer commits to the percentage of profit they are willing to share

e.g., 50%.

•

KEF, Alm.del - 2023-24 - Bilag 98: Henvendelse af 30/11-23 fra OX2 om forslag til en åben dør 2.0-udbudsmodel for havvind i Danmark

Figure 4: Overview of the annual profit of the developer and the State before and after the grace period.

This diagram is only for illustrative purposes and it is unlikely that total revenues will remain the same year

on year.

The sharing of profits will have an impact on the cumulative cash flows for the developer over the lifetime

of the wind farm. Figure 5 shows the results of a financial modelling exercise based on a 4GW wind farm.

Figure 5: Illustrative accumulated cash flow for developer and the State, based on 4 GW wind farm with a

10 year grace period and a profit sharing percentage of 50%. Cumulative cash flows are shown in DKK bn.

KEF, Alm.del - 2023-24 - Bilag 98: Henvendelse af 30/11-23 fra OX2 om forslag til en åben dør 2.0-udbudsmodel for havvind i Danmark

Under this example, the State could achieve revenues of more than 14.6bn DKK, and the developer can

gain a total profit of 5.7bn DKK across the full lifetime of the wind farm. The figure demonstrates the large

initial capital expense (capex) the developer pays for the construction of the wind farm, which they then

recover throughout the wind farm's useful life. Figure 5 also clearly demonstrates how the State only

begins to receive revenue once the grace period has ended.

The model shows that with no profit sharing, the developer can expect to break even after 21.5 years (i.e.,

15.5 years after commissioning). However, with profit-sharing the breakeven point is pushed back by two

years as they will be sharing a portion of their annual profits with the State. There is not expected to be a

large change in the breakeven point compared to models that require a large upfront cost for the use of the

seabed. This is because the initial investment costs will be much higher, and therefore take much longer to

recover.

Any developer would, due to the profit-sharing mechanism, have an incentive to reduce profits in the

licensed company if these can be shifted towards other related entities. Elements from the transfer pricing

control and regulation on arms-length business interaction that applies in the power and gas distribution

business can be used here. Similar measures are necessary to ensure fair profit sharing in models with state

co-ownership.

KEF, Alm.del - 2023-24 - Bilag 98: Henvendelse af 30/11-23 fra OX2 om forslag til en åben dør 2.0-udbudsmodel for havvind i Danmark

Section 6: Comparing Open Door model 2.0 to other models

–

what are the key differences?

Below is a table summarising an evaluation of three separate models against the design criteria presented

in Section 2. The three models that are evaluated include the public tender model, the old Open Door

model, and the proposed Open Door model 2.0.

Figure 6: comparison between public tender model, old Open Door model, Open Door model 2.0 to the

design criteria

The table demonstrates that the Open Door model 2.0 satisfies the design criteria, improving on the

previous Open Door model. It also clearly shows that Open Door model 2.0 delivers a separate service that

sits well alongside the public tender model.

One of the unique features of the public tender is the state ownership model, which dictates that the State

must partially own (20%) of all the offshore wind projects selected as part of the tender. It could also be

possible to embed this principle into the Open Door model 2.0 in the place of profit sharing. Certain

considerations would need to be taken into account, such as the impacts on the level of additional

administrative burdens that would be placed on the DEA and the level of risk that the Government is willing

to take in terms of minimum requirements.

Section 7: Conclusion

There are clear advantages for implementing a new Open Door model 2.0:

Support Denmark’s PtX and green energy ambitions

A fast and simple model for offshore wind development in Denmark will accelerate the growth of

green energy in both the short and long term.

Become a key energy transition player for Europe

The model will help secure Denmark’s position as a leading player in Europe’s green transition and

lay the foundations for a PtX industry in Denmark.

KEF, Alm.del - 2023-24 - Bilag 98: Henvendelse af 30/11-23 fra OX2 om forslag til en åben dør 2.0-udbudsmodel for havvind i Danmark

Reinvestment into Denmark’s green economy

The state receives revenue from the rights to the seabed, which may be reinvested in other

initiatives that contribute to the green transition.

Green job creation

The model will increase investments in the green transition and create new green jobs in Denmark.

Reduced burden on the authorities

By offering an alternative model for public offshore wind tenders the administrative burden on DEA

and Energinet will be reduced.

KEF, Alm.del - 2023-24 - Bilag 98: Henvendelse af 30/11-23 fra OX2 om forslag til en åben dør 2.0-udbudsmodel for havvind i Danmark

Disclaimer

– This memo’s financial data and results are based on a financial model

developed by KPMG on the basis of input from

OX2. Data from the financial model should be considered to be illustrative example data and cannot be used for commercial

valuations, trading recommendations or the like.