New tendering process for offshore wind in the Finnish exclusive economic zone

Status update

Following up on our previous article, the Finnish Government has on 3 October 2024 issued a government proposal (HE 147/2024) for a new Act on offshore wind power in the Finnish exclusive economic zone (EEZ). The Act introduces a state-led tendering system for offshore wind farm areas, in contrast to the previous open-door policy. The legislative reform aims to create a fair and predictable model for developers while securing the overall benefit for Finland.

The proposed Act is waiting to be processed by the Finnish Parliament and is intended to enter into force in January 2025 at the earliest. The tendering process and its details will be further specified in a government decree expected to be prepared by March 2025 and adopted in May 2025.

This article first examines the key changes made to the government proposal, followed by an overview of the entire proposed tendering process.

Main changes to the proposal

The draft proposal issued in May 2024 was subjected to a hearing process in the summer. While the planned tendering process remained mainly the same under the finalised proposal, some changes were introduced, including:

Of the qualitative criteria used in assessing tenders, the criterion for grid connection was amended to a more general criterion, “improving flexibility of the energy system”, which could include aspects such as energy storage, hydrogen production, and the amount of capacity to be connected to the grid. (Sect. 5)

The new assessment criterion of “reliability” was introduced. The participants need to be reliable in addition to having sufficient skills, experience, and financial capacity to promote an offshore wind project. (Sect. 7)

It was confirmed that only one participation collateral needs to be issued if the participant participates in several tendering processes organised at the same time. (Sect. 9)

The precondition of three participants in a tendering process was deleted. The draft proposal also included a restriction that a tender participant could have use rights for up to three projects, that have not been put into operation, in territorial waters, EEZ and Åland’s water areas. This restriction was limited to apply only to such projects in the EEZ. (Sect. 13 and 7)

The time to apply for an exploitation permit after the tendering decision has gained legal force was prolonged from three to four months. Also, the time to issue a progression collateral after the issuance of the exploitation permit was prolonged from two to three months. (Sect. 16 and 18)

The anticipated amount of a participation fee was increased to approximately 20,000 euros. The participation fee is payable per tender. The amount of the participation fee will be determined in a government decree.

The Government's discretionary power was extended in assessing the transfer and cancellation of exploitation permits, particularly in cases where national security could be endangered. (Sect. 22 and 24)

Appeals against decisions made by the Energy Authority were confirmed to be handled by the Market Court, not the Administrative Court of Vaasa. Also, the rectification procedure was extended to cover decisions on the release of participation collaterals. (Sect. 32)

Proposed tendering process

The proposed tendering process consists of three main steps: The Government decides on the sea area(s) to be tendered. After the area selection, the Energy Authority organises the tendering process(es). The winner of the process receives the right to apply for an exploitation permit from the Government. The Government’s decision on the area(s) to be tendered is scheduled for October 2025. The first tendering process is planned to begin in December 2025 with a decision on the winner in June 2026.

Tender and area selection

Under the proposal, the Government decides on the tenders and selects the sea areas to be tendered, taking into account the overall benefit to society, including the needs of maritime use, environmental aspects, projects in the territorial waters, grid connection aspects and suitability of the area for offshore wind power production.

The decision may already include details of the tendering process, such as its schedule or conditions for exploitation. The decision will undergo a strategic environmental assessment (SEA, in Finnish SOVA).

Tendering process

The proposed legislation assigns the task of organising the public tendering process of the selected sea areas to the Energy Authority. The award criteria are to include the amount of the exploitation fee to be paid by the project owner. Additionally, qualitative criteria would be applied such as financial standing, experience and resources, environmental impact, local acceptance, energy system flexibility, security, and topics under EU regulations. The details of determining and measuring such qualitative criteria are not yet defined and will be based on further regulations and the individual tendering decisions.

A tender is binding on the bidder and can be submitted by an individual company or by a consortium, but only one entity from a group of affiliated companies may participate, be it individually or as a member to a consortium with third parties. However, the exploitation permit cannot be granted to a consortium. If the winner is a consortium, the exploitation permit can only be granted to a company or corporation formed by all the members of the consortium.

Tender participants are obliged to pay a non-refundable participation fee, which is estimated to be around 20,000 euros, and submit a participation collateral. The amount of the collateral must be “sufficient to ensure the participant's commitment to advance the project”. What this means will be further specified in the upcoming decree. Accepted forms are a bank guarantee, a pledged deposit, or another form approved by the Energy Authority.

What is significant is that, under the proposal, only one tender can be won by a single bidder in case several areas are being tendered at the same time. In addition, an entity cannot participate in the tender process if it has (itself or jointly with other parties) an exploitation permit for three or more offshore wind farm areas in the EEZ on which the wind farms have not been taken into operation.

Exploitation permit

The winner of the tendering process is granted the right to apply for an exclusive exploitation permit for the tendered area. The exploitation permit covers the exploitation of wind energy and the related research. The exploitation of wind energy is intended to include wind turbines as well as related buildings such as substations and hydrogen plants. The construction and use of cables would remain governed under the current EEZ Act. The winner needs to apply for the exploitation permit within four months after the tender decision has gained legal force. A permit could be denied for reasons of national security, material deficiencies in the tender, or due to a significant decrease in the winner’s capacity to fulfil the tender’s requirements.

The exploitation permit is granted for a fixed term and the scope may later be reduced to cover only the area on which the offshore wind farm project is located. The permit may include a condition that all or part of the power produced must be imported to Finland.

Progression collateral

A progression collateral needs to be issued within three months from the date of the permit. The collateral is accumulated annually. The amount of the collateral will be specified in the upcoming decree, and the proposal vaguely refers to an amount which “must be sufficient to ensure the commitment of the permit holder to advance the project as provided for in the exploitation permit.”

The developer may lose the collateral in case the exploitation permit has been cancelled or withdrawn or the permit conditions have been breached without rectification in due time. The collateral is maintained until the wind farm has been taken into operation i.e. when the exploitation fee starts to accumulate. The details of the exploitation fee will also be specified in the upcoming decree. It remains to be seen whether the fee is linked to the installed capacity of the wind farm and/or a reference price addressing the development of electricity market prices.

Assignment and appeal

Assignment of the permit to another project owner requires the Government’s consent and presumes that the transfer does not endanger national security and the operations continue in accordance with the conditions of the permit.

The tendering and other decisions made by the Energy Authority may be appealed in the Market Court, while the Supreme Administrative Court handles appeals on exploitation permit decisions made by the Government.