Offshore wind energy: a learning opportunity for Spain

[Article originally published in El Periódico de la Energía]

Offshore wind energy is an electricity generation technology with a high potential to ensure a long-term secure energy supply and decarbonise the economy, thus contributing to the main objectives of the European Union’s energy and environmental policy.

There are two types of offshore wind technology: fixed-bottom wind turbines and floating wind turbines. Floating wind turbines are the only viable technology in Spain, given that our continental shelf descends rapidly a short distance from the coast and fixed-foundation wind turbines cannot be anchored at such depths.

After years of anticipation, the construction of wind farms along our coastline has begun to be considered, mainly due to the maturation of floating technology and the consequent reduction in investment costs.

The new regulatory framework for the processing and authorisation procedure for electricity generation facilities in the territorial sea is also being developed. The previous regulatory framework, defined in Royal Decree 1028/2007, of 20 July, became obsolete and it was necessary to order a moratorium on the processing of applications for offshore wind power facilities (by Royal Decree-Law 21/2021, of 26 October).

United Kingdom and Denmark, successful stories

This means that it is a good time to analyse successful models at European level – such as Denmark and the United Kingdom – to avoid repeating our country’s regulatory mistakes.

An example of good practice in both countries is the creation of a centralised administrative unit specialised in the processing of offshore wind projects. The Danish Energy Agency (DEA) and The Crown Estate provide the developer with appropriate advice and help to efficiently process the necessary authorisations and/or licences from an environmental, energy and maritime point of view.

 In addition, Denmark reduces regulatory risk and facilitates communication by implementing a one-stop-shop organisational mechanism, whereby the DEA is the single point of reference for developers and the authorities concerned. Both administrative units also carry out a preliminary characterisation of the maritime space, on the basis of which the tendered bidding zones are determined.

 This preliminary study reduces the risk in the authorisation process by providing technical information to developers to assist them in selecting the best available site, the safest technological option and the fairest price according to the real costs of the projected investment.

Early dialogue between the different stakeholders is also promoted, thus reducing the risk of subsequent social conflicts. In Denmark, the DEA invites potential bidders and all stakeholders to a series of technical and market dialogues.

Under CfD support schemes

 Holding these dialogues in advance helps to harmonise stakeholders’ expectations and ensures fair competition in the authorisation procedure, thanks to transparency and equal treatment of potential bidders.

 In the UK, developers must consult all affected bodies at the approval stage of the development consent order, where all relevant proposals must be considered. Convened parties also have the opportunity to participate in the examination of the application through hearings or written submissions.

The financial support schemes in both countries are based on Contracts for Difference (CfD), a contractual model that provides security to developers and the government. Although all power is sold on the open market, the CfD provides electricity generators with a differential payment that falls between the fluctuating Market Reference Price and the fixed Strike Price secured in the competitive auction.

 This means that generators receive a guaranteed revenue stream throughout the life of the contract, which reduces investment risk and protects both developers and consumers from volatile wholesale prices.

Spain, with delay

While these examples of success should be considered in the new regulatory framework for offshore wind in Spain, existing regulatory and administrative barriers, such as the final approval of the Maritime Spatial Management Plans (POEM), need to be addressed.

 Spain is almost two years behind schedule in approving these plans, according to the time limit imposed by Directive 2014/89/EU of the European Parliament and of the Council of 23 July 2014 establishing a framework for maritime spatial planning.

The European Commission has already opened an infringement procedure against the Spanish authorities for this situation, which are already late in publishing the draft Royal Decree that will regulate the authorisation procedure, as it was estimated that it would be ready by the end of 2022.

Marta Vicioso

Marta Vicioso is a lawyer at the International Institute of Law and Environment (IDMA), with a double bachelor’s degree in Law and International Relations  (Universidad Pontificia de Comillas).