Parliament approves legislation on a new tendering process in the Finnish exclusive economic zone
December 2024
The Finnish Parliament approves legislation on a new tendering process in the Finnish exclusive economic zone
Following up on our previous
The approved Act will be submitted to the President of the Republic for confirmation. The Act is intended to enter into force in January 2025. 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 Act during parliamentary handling and is followed by an overview of the entire tendering process.
Revisions to the Act
The government proposal on the Act (HE 147/2024) was issued on 3 October 2024. Some revisions to it were approved by Parliament, following the recommendation of the Commerce Committee, which considered several expert opinions and authority statements. These modifications included the following:
Runner-up opportunities
The runner-up, placed in the second place, receives an opportunity to apply for the exploitation permit in case the winner does not apply for the exploitation permit within the set deadline (i.e. within four months).
If the runner-up wishes to apply for the exploitation permit, it must submit an application and provide a new participation guarantee no later than six months after being notified of the matter.
The change was considered to enable project development to commence more quickly than if a new tender process were initiated. Granting the runner-up a longer, six-month application period compared to the four-month period for the winner was considered reasonable, as significant time may have passed due to appeals, making it challenging for the runner-up to anticipate whether it will have an opportunity to apply for the exploitation permit.
Lifted limitations on winning tenders
The restriction limiting bidders to winning only one tender was removed. Several areas may be tendered simultaneously, and the purpose was to ensure equal opportunities for all participants to compete in tenders for all areas.
It was specified in which situations a participant could win a maximum of one or two tenders. In essence, a participant could win i) one tender if the participant (also including each member of a consortium) or its group company holds, individually or jointly, two exploitation permits for areas where wind farms have not yet been put into planned use, or ii) two tenders if the participant or its group company holds, individually or jointly, one exploitation permit for such areas.
The revision was intended to prevent any single participant from acquiring excessive project rights in one go, thereby safeguarding the successful implementation of the projects.
Others
Participants are required to provide a participation guarantee for each tender. A single participation guarantee is not sufficient if a participant is competing in multiple tenders held simultaneously. The requirement was considered necessary to ensure commitment to and advancement of each project.
Parliament also adopted a statement requiring the Government to streamline the water permit process for offshore wind projects.
Tendering process
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
The Government decides on the tenders and selects the sea areas to be tendered, taking into account the overall benefit to society. This includes 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 on 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
In the EEZ, the public tendering process is administered by 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.
To safeguard successful implementation of the projects, the Act includes restrictions to prevent any single participant from acquiring excessive project rights. According to the Act, a participant could win
one tender if the participant (including each member of a consortium) or its group company) holds, individually or jointly, two exploitation permits for areas in the EEZ where wind farms have not yet been put into planned use, or
two tenders if the participant or its group company holds, individually or jointly, one exploitation permit for such areas.
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 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 become legally binding. 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.
If the winner does not apply for the exploitation permit within the given four-month period, the runner-up, placed in the second place, will be offered the opportunity to apply for the permit. In this case, the runner-up must apply for the permit and submit a new participation collateral no later than six months after receiving the notification. This process aims to expedite the commencement of project development compared to initiating a new tender process in case of the winner’s passivity.
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 Act 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 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.
