Benelux Energy & Utilities Update – January 2020

Written on 15 Jan 2020

In this bimonthly update, we offer a brief overview of a few important legislative and economic developments in the E&U sector in the Benelux. Please feel free to reach out to our team of experts for more information.

Tender lot V "Hollandse Kust Nord" open for bidding in April 2020

As part of the Dutch renewable energy transition, lot V 'Hollandse Kust Noord' will be tendered for a construction and exploitation permit (i.e. concession) in Spring 2020. The lot, which is off the coast near Egmond aan Zee, provides capacity for approximately 700 MW. The permit will have a tenor of 30 years. The tender is open for bidding between 2 April  and 30 April 2020, 17:00 CET. After the successful zero-subsidy tenders for lots within 'Hollandse Kust Zuid', this tender will again be on a zero-subsidy basis.

A permit may be awarded if the construction and exploitation is (i) capable of being performed, (ii) technically, financially and economically sound, (iii) complies with the terms of the lot decree and (iv) construction can be commenced within 4 years of the date that the permit has become irrevocable. To the extent that multiple bidders compete in the tender a permit will be awarded on the basis of qualitative criteria. Assessment of these qualitative criteria results in points being awarded to bidders.

As to the ranking between qualitative criteria, extra weight is attributed to criteria which contribute to (a) obtaining security of timely commissioning, (b) continuity of exploitation and (c) limiting social costs.

In order to satisfy the condition of financially soundness, an applicant has to demonstrate that at least 20% of the aggregate costs of investment is supported by 'relevant' equity. If an applicant is a subsidiary, the relevant equity for this purpose includes the equity of its parent company. In addition, to the extent that the applicant is a joint venture or otherwise part of a consortium, equity of the partners (and, if relevant, their respective parent companies) may be added to comply with this requirement.

Part of lot V 'Hollandse Kust Noord' is located within the  twelve nautical miles of the territorial waters of the Netherlands, therefore this part of the lot is owned by the Dutch government.. Consequently, a right of superficies and easement will have to be created. Consideration is set at €0.98 per MWh/year – fixed at €704,659.20 (subject to indexation) for the first year of exploitation. For the period from the permit being awarded until commissioning a reservation, consideration is payable at €650 per MW/year – fixed at € 116,844. Additionally a rental fee  is payable for infield cables of €3.29 per square meter of restricted lane – fixed at an one-off fee of €32.950 to access grid connection via TenneT. TenneT is the appointed offshore grid manager and is responsible for connecting wind farms to the network.

Six recommendations to help Belgium make a successful energy transition

While last 5 October 2019, the Belgian Federal Minister for Energy reiterated Belgium's commitment to phase out of nuclear energy by 2025, the Flemish engineering association "IE-net" issued a report on 19 October 2019 recommending postponing  the closure of the two youngest nuclear power plants in order to facilitate a smooth energy transition. According to IE-net, as there is currently no clear solution to ensure the security of the electricity supply in case of a blackout after 2025, Belgium should keep some nuclear power plants open until Belgium finds other climate-friendly alternatives.
In this respect, it should be recalled that the Belgian government is considering the introduction of Capacity Remuneration Mechanism to compensate the need for the extra supply of electricity. However, according to Professor of Climatology, Jean-Pascal Van Ypersele, this option is not particularly advisable since gas-fired power plants also create a significant amount of pollution.

In addition to extending the operating life of some nuclear power plants, IE-net issued five more recommendations to help Belgium make a successful energy transition :

  1. invest in research and development
  2. invest in renewable energy infrastructure
  3. invest in long-term policy in a European framework
  4. encourage behavioural changes (i.e. make the mobility in cities more difficult for cars, switch to electrical vehicles)
  5. gradually introduce a minimum CO2 tax

It remains to be seen if the Belgian federal government (which has still not been constituted) will implement these recommendations.

Supreme Court orders Dutch State to reduce greenhouse gas emissions by 25% by the end of 2020

In proceedings initiated by the non-profit organisation Urgenda, the Dutch Supreme Court has ruled that the Dutch State must reduce greenhouse gas emissions in the Netherlands by 25% by the end of 2020.

The Supreme Court's findings were, amongst other things, based on the UN Climate Convention and the European Convention for the Protection of Human Rights and Fundamental Freedoms, which obligate the Dutch State to protect the life and well-being of citizens in the Netherlands. The Supreme Court's judgment confirms previous rulings (from 2015 and 2018) by the District Court and Court of Appeals in the Hague.

In accepting Urgenda's argument that the emission reduction should be at least 25% by the end of 2020, the Supreme Court referred to the international consensus (including amongst scientists) on the urgent need to reach this target. Moreover, the Dutch State had not explained why a lower reduction would be sufficient to meet the target accepted by it (pursuant to from various international treaties that the Dutch State had signed).

Although the Dutch State is unlikely to be able to actually meet this target, the Supreme Court's judgment – which is widely seen as groundbreaking – will put additional pressure on the Dutch government to adopt further measures to reduce greenhouse gas emissions and to take measures to accelerate the transition to renewable energy production.

Dutch energy company Eneco to be acquired by Mitsubishi Corporation and Chubu

Energy company Eneco, which is active in the Netherlands, Belgium, Germany and the United Kingdom, will be acquired by a Japanese consortium consisting of Mitsubishi Corporation and Chubu for a purchase price of €4.1 billion.

Eneco is the third largest  electricity and gas supplier in the Netherlands and is heavily focussed on renewable energy. The company will remain headquartered in Rotterdam (the Netherlands) and will continue to operate under its own brand. Mitsubishi Corporation will also use Eneco as a hub to expand its own energy activities in Europe.

The transaction is still subject to the formal approval of the 44 Dutch municipalities holding shares in the company (Rotterdam and the Hague being the largest ones) and clearance by the relevant regulatory authorities. The transaction is expected to close before the Summer of 2020.