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

As one of the measures to promote the development of offshore wind projects in Finland, a draft government bill was published on 23 May 2024, introducing a new tendering process and clarifications to permitting of offshore wind in the exclusive economic zone of Finland (EEZ).

The proposal is currently open for consultation and is scheduled to be submitted for handling of the Finnish Parliament this autumn. The proposed Act 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.

The legislative reform aims to create a fair and predictable model for developers and to secure the overall benefit of Finland. The 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 proposed new procedure, the Government of Finland decides on the tenders and selects the sea areas to be tendered, taking into account the overall benefit to society, including 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 is subjected to an environmental impact assessment of plans and programmes drawn up by public authorities (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, grid connection, 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. Only one entity from a group of affiliated companies may participate alone or as part of a consortium.

Tender participants are obliged to pay a non-refundable participation fee, which is estimated to be around 13.000 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 under tendering at the same time. In addition, an entity cannot participate in the tender process if it has (itself or jointly with other parties) an exclusive right to three or more Finnish offshore wind farm areas on which the wind farm has not been taken into operation. This includes offshore projects under development and construction in the EEZ, territorial waters and areas of Åland.

Exploitation right

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. 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 three months after the tender decision has gained legal force. A permit could be denied due to 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 energy produced must be imported to Finland.

A progression collateral needs to be issued within two 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 of the permit to another project owner requires the Government’s consent and presumes that the transfer does not endanger national security and it is evident that the operations continue in accordance with the conditions of the permit.

The permit may be subjected to an appeal and the proceedings are handled as matters of urgency by the administrative court of Vaasa.