Background
The Danish Energy Agency (the DEA) has put case processing on hold under the open door scheme. This decision has been controversial in both industry and in Danish parliament, as it was unclear on which basis the decision was made. The government argued that grave concerns regarding compliance with EU state aid regulations necessitated the decision, however few details were forthcoming.
Replying to a question from the parliamentary committe for Climate, Energy and Supplies, the responsible minister has on 21 February 2023 provided a few more details on how the government views the state aid concern.
The minister's explanation
The minister first confirmed that that there may be a significant risk that the granting of permits for offshore wind turbine projects and other renewable energy projects under the open door scheme could be in breach of EU law.
The assessment was made by The Ministry of Climate, Energy and Supply in dialogue with the government's State AidSecretariat. The assessment is connected, among other things, to the development in the market for offshore wind, i.a. a percieved unprecedented great interest in the open door scheme up to the time when the amendment of the relevant act entered into force on 1 July 2022.
According to the minister, the DEA has received 54 new applications since April 2022, a large number of which were submitted before 1 July 2022. For comparison, the DEA received in 2020 and 2021 respectively one and zero applications. In addition, industry participants during the autumn of 2022 have expressed that they are willing to pay the state to establish offshore wind under the open door scheme.
According to the minister, the market indications in combination with the fact that awards under the open door scheme take place without competition (first-come-first-served principle) have given rise to the conclusion that there is a significant risk that the open door scheme is in breach of EU law.
Our assessment
In our view there are still only sketchy details available to market participants as to exactly why the open door case processing has been suspended.
According to the minister the first-come-first-served principle (and no or only little competition) and the market indicators have given rise to the assessment that there is a significant risk that open door scheme could be in violation of EU state aid regulations.
Pursuant to EU rules state aid must either be notified to the Commision or allowed under a group excemption.
There is huge disappointment among market actors that licenses are not awarded as expected, and a number of projects are now expected to be delayed or abandoned, depending on the outcome of the government's further investigations and deliberations.
It should on the other hand also be borne in mind that violations of state aid regulations can have a serious impact on any recipient of state aid, as state aid granted in non-compliance with applicable rules must be paid-back to the state. Hence, there is merit in investigating thoroughly whether the open door procedure can be recommenced or must be altered before cases can be processed and licences granted.
WSCO law firm assists both developers, investors and contractors and suppliers within offshore wind in Denmark and internationally and will continue to follow this area of the law closely.
