Orientation meeting, 15 September 2021
Regarding the procurement framework for the construction and the co-owner- ship of the Energy Island in the North Sea
Summary
1 Introduction
On the 15 September 2021 the Danish Energy Agency (the DEA) held an orientation meeting for potential tenderers and other relevant market operators. The orientation meeting was announced by a press release on the DEA’s website and by a prior information notice, cf. no. 2021/S 176-457666.
Links:
Invitation to orientation meeting as part of the market dialogue II regarding the En- ergy Island in the North Sea | Energistyrelsen (ens.dk)
Services - 457666-2021 - TED Tenders Electronic Daily (europa.eu)
The participants in the orientation meeting represented a wide range of relevant mar- ket operators. Both natural and virtual participants were present at the orientation meeting. The companies represented by a participant were listed in the presentation, cf. section 4.
2 Subjects
Welcome by CEO Kristoffer Böttzauw
The DEA’s CEO Kristoffer Böttzauw welcomed all participants and described the vi- sion behind the project summarised to:
The Energy Island in the North Sea will be the first of its kind in the world, and, thus, it requires new thinking, innovation and brave private investors.
For the Danish Government, it has been crucial to ensure that private actors are involved in this task and that ownership is dedicated to the private partner.
Through private co-ownership, we can ensure that the knowledge and innovative power that exist in the private business sector is activated and thereby ensure that the visions for the Energy Island in the North Sea become a reality.
Creating an energy island, is not only a task for the State, but a task, that is best solved by using the market to effectively drive the development.
Currently we are working on designing the tender process, ownership model as well as the commercial and technical set up for the energy island. Both the technical, legal and financial aspects are being analysed, in order to prepare the tender framework following EU procurement rules. The DEA invites all competent players to participate in the market dialogue and the following tender process that will be conducted as a transparent and fair activity based on equal treatment of all market players.
The Energy Island in the North Sea
An example of how the island could look like is shown in the presentation. The island is a large man-made structure placed approximately 100 km from the west coast of Denmark. At this place there is a great wind resource (around 10 m/s average) and shallow waters of 25 meters depth.
The size of the island is not determined, but the transmission equipment itself needs a lot of space for transmitting 3 GW offshore wind power (estimated 120.000 m2).
The island should potentially be 4 times bigger if the capacity of 10 GW is to be handled.
Procurement framework & timeline
There are three procurements in the overall project:
1) Energy Island, North Sea (Construction & co-ownership of the island) ten- dered by the DEA
2) Transmission system (On-island equipment, interconnections etc.) ten- dered by Energinet
3) Offshore Wind Farms (Construction & operation of OSW farms) tendered by the DEA
Political agreement of 1 September 2021 Eight key elements
One tender covering both co-ownership and construction of the island
Ownership model
Zones and size of the Energy Island
Business model for the Transmission zone
Business model for the Innovation zone
The economic system around the Energy Island
Responsible co-owner and investment screening
Award criteria
The ownership model is understood as joint ownership of the Energy Island A/S, where the Danish State owns minimum 50.1%.
The island size question
The size of the island has not been decided. The DEA is interested in hearing whether relevant market operators consider building a small island (3 GW) with the possibility of modular expansion opportunities. Or whether it would be more econom- ically feasible to build the big island from the beginning (10 GW). This subject is expected to be part of the market dialogue.
If the big island is built from the beginning it opens for a new question – how the unused area shall be financed (the flexibility zone as illustrated in the presentation).
Business model
Transmission zone: One revenue stream from Energinet – a state owned company.
The revenue for the transmission zone is thereby a stable income for the joint com- pany and could be considered a low-risk investment.
Innovation zone: Revenue stream from renting out the area in the innovation zone.
The part that performs the innovative activity gets the revenue form such activity. The management of the joint company can decide that the company itself will perform innovative activities in the innovations zone. The revenues of such joint activity will fall to the joint company (and to the parties according to the ownership model).
Why Invest
The DEA highlighted - to participants still in doubt whether they should participate - the key reasons for investing in the Energy Island project, summarised to:
• It will be the world’s first of its kind and when connected to 10 GW offshore wind, it will also be the largest construction project in the history of Denmark.
• A location and environment with great opportunities for green innovation (PtX etc.)
• New commercial opportunities (supplying services to commercial users of the island, incl. OSW)
• Steady and low risk income from Energinet who will rent the transmission zone, plus potential income from innovation activities and other users of the island.
• Chance to obtain valuable knowledge and experience with new solutions and
3 Q&A
The following questions were asked at the orientation meeting. The answers given at the meeting are also listed:
Questions Answers
1.
Have you considered whether the envi- ronmental impacts related to the con- struction of the island should be in- cluded in the project?
Yes, the environmental impacts of the project are of great focus and will be a part of the coming market dialogue
2. Regarding innovation, how large a budget has been defined to promote the innovation?
Sufficient and appropriate conditions and space for innovative activities on the Energy Island are a high political priority.
There is political will for the state to pay, according to its ownership share, its part of the cost of the potential inno- vation zone as determined by the pri- vate partner. Further budget alloca- tions are currently not part of the politi- cal agreement.
Furthermore, it is noted that the DEA is working on a PtX strategy that could lead to political discussions and a polit- ical will to set budgets for promoting such strategy. The strategy will be pub- lished in the near future.
3. If the Danish State is 50% co-owner of Energy Island, does that mean the State will also be contributing 50% of the development capital or 50% of the equity investment structure?
For the financing of CAPEX, it is cur- rently assumed that the private partner will be responsible for financing the en- tire construction period. The Danish State will pay for its part of the Energy
Financing will be a topic of the coming market dialogue II.
4. The picture in the presentation shows a caisson solution, is a re- claimed/dredged island with revetment still under consideration? or will this be up to the investors/bidders?
The DEA, together with technical advi- sors, are analysing several solutions, including the caisson solution, in order to set the functional requirements for the island.
5. Who is helping you with this evaluation (of suitable solutions)?
Sweco – as technical advisor - is help- ing the DEA defining the functional re- quirements for the island.
6. Can you elaborate on the functional re- quirements?
It is expected that functional require- ments will be set for both the construc- tion of the island, the functions on the island and for interfaces between the island owner, Energinet and wind- farms.
We welcome good advice from the market on this topic in the coming mar- ket dialogue II.
4 Presentation from the orientation meeting
