The COVID-19 pandemic presents significant challenges to our clients, across all sectors of the global economy. We have developed our global legal hub to inform clients of the legal and commercial implications of the ongoing crisis. In this legal update, we consider the implications of the pandemic on the scheme for the development of renewable energy projects in the Netherlands.
Preparing new SDE++ subsidy applications
Under the SDE++ renewable energy subsidy scheme, the Dutch Government is expected to award a total amount of €5 billion in subsidies in the autumn of 2020. Compared to the existing subsidy scheme, the SDE++ subsidy scheme is not only open to renewable electricity, gas and heat technologies, but also to projects that use other technologies that limit the emission of greenhouse gasses, such as, for example, carbon capture and storage and certain hydrogen applications.
Subsidy applications can be submitted from September 29, 2020 until October 22, 2020 and project developers are currently in the process of preparing their applications. While project developers are working hard to comply with these requirements, the ongoing COVID-19 crisis poses several logistical problems for project developers to prepare a timely and complete subsidy application.
Subsidy applications can only be submitted for projects that are in a relatively advanced stage of development. Project developers must, for example, show that land rights and material permits have been obtained, before they can submit a valid application. Depending on the specific renewable energy technology used for a particular project, other requirements may apply, for example, the obligation to complete a geological survey or a detailed feasibility study. The current COVID-19 crisis poses some practical issues in getting a valid application ready in time.
Firstly, there is the practical issue that the offices of most public authorities in the Netherlands are closed (and Government agents are currently working remotely), which may cause practical difficulties in discussing design options and permit requirements with the competent authority.
Secondly, there can be practical issues with the performance of the necessary technical studies. For example, it could be more difficult to perform ecological inventory studies and soil surveys at the development site as of result of COVID-19 working restrictions in respect of social distancing. Such issues may cause a delay in obtaining the material permits, which has a detrimental impact on the ability for project developers to submit a valid subsidy application on time.
Furthermore, it is important to note that the COVID-19 crisis is likely to impact public decision-making procedures, which are often not well adapted to remote-working conditions. The governance rules on how decisions are taken by, for example, provincial and municipal councils are typically not adjusted to electronic meetings and remote voting procedures. This makes it difficult for public authorities to take decisions, grant permits and adopt spatial planning arrangements that allow for the construction of renewable energy projects. The Dutch national Government recently adopted emergency legislation that largely resolves these challenges for provincial and municipal councils, but it is likely that other authorities are still experiencing difficulties in aligning their decision-making processes with the COVID-19 working restrictions. Due to the potential for there to be practical problems when contacting civil servants and obtaining permits from public authorities, we advise project developers to plan for additional permitting delay when preparing their SDE++ subsidy applications in the coming months, in order ensure the timely submission of subsidy applications.
Projects under construction: SDE construction deadlines
The global COVID-19 crisis can also affect renewable energy projects that are in the construction phase, and which have already obtained an SDE+ subsidy decision. As the restrictions imposed by Governments to mitigate the COVID-19 crisis continue, the risk of construction delays is likely to increase, for example, as a result of travel restrictions, social distancing measures or supply chain issues.
Project developers should be mindful of the implications of any construction delays on the validity of the SDE+ subsidy decisions. These decisions are typically subject to two specific construction deadlines. First, the project developer must negotiate and sign the construction contract for the project within one year after the date of the subsidy decision. More importantly, subsidy decisions also require the project developer to complete the construction works within four years after the date of the subsidy decision (shorter period are applicable for solar projects).
With the ongoing risk of construction delays, project developers will need to monitor closely their ability to comply with the construction deadlines included in the SDE+ subsidy decision. While the SDE+ rulebook allows developers to apply for an extension, this is subject to certain restrictions and continued delays to the progress of the project do, at least in theory, allow the authorities to revoke the subsidy decision. Given the current unprecedented circumstances, we believe that such revocation would be disproportionate and could therefore be challenged in court, but it is important for project developers to take a proactive approach to managing delay, particularly with respect to the public authorities.
Several business organisations have raised concerns on these points to the Dutch Government, and have lobbied for an automatic extension of all construction deadlines with a period of one year for all projects. The Government recently informed Dutch parliament that the extensions will not be granted automatically to all projects. Instead, the Government indicated that they will be flexible in granting an extension of the construction deadlines to projects that should have been completed in 2020. Please note that the Government’s response to parliament does not state that project developers can apply for extensions that exceed the current time periods contained in the SDE+ rulebook. While the response of the Government is vague on this point, it appears that the SDE+ rulebook itself will not be amended to introduce extensions of the construction deadlines that exceed the existing time periods. We therefore urge project developers who are confronted with substantial construction delays to be mindful of the SDE+ construction deadlines and to proactively discuss the risks of non-compliance with the public authorities.