Germany contracts subsidy-free offshore wind

20 April 2017, Week 15, Issue 554

The results of Germany’s first competitive offshore wind auction were announced last week. Four projects with a total capacity of almost 1.5 GW, all located in the German North Sea, were accepted by the federal energy markets regulator Bundesnetzagentur (BNetzA). 

More significantly, however, three of the four winners will be built and run entirely without subsidy, and thus represent the first “zero bids” of their kind.

Danish wind developer DONG Energy was awarded the right to build three offshore farms: OWP West and Borkum Riffgrund West 2 (both 240 MW), and the 110-MW Gode Wind 3. All three are expected to be commissioned in 2024, subject to a final investment decision (FID) in 2021. 

Gode Wind 3 was awarded on a bid price of 60 euros (US$64) per MWh, but the company made zero bids for both OWP West and Borkum Riffgrund West 2. They will not receive any government subsidy over and above market-driven electricity prices.

DONG said the cost drivers that had enabled it to make such a low bid included the anticipation of significantly larger turbines coming onto the market, as well as relatively high wind speeds in the region. Moreover, the company can benefit from economies of scale, as it already operates 902 MW of offshore wind farms in the area, in the form of Gode Wind 1 and 2, and Borkum Riffgrund 1. A further 450 MW is under construction at Borkum Riffgrund 2, due to be commissioned in 2019.

Elsewhere, the public utility Energie Baden-Württemberg (EnBW) also won its zero-euro bid to build the 900-MW He Dreiht offshore farm. That project is expected to be commissioned in 2025. Like DONG, EnBW will also be able to benefit from cost-saving synergies from two other nearby wind projects it currently has in development: the 497-MW Hohe See and 116-MW Albatros projects. Both these are scheduled to be ready in 2019.

The zero bids will come as welcome news to the German government, particularly as they demonstrate the increasing cost competitiveness and potential of offshore wind and renewables at a time when the country is looking for results from its Energiewende energy transition programme.

BNetzA president Jochen Homann said the auction had unlocked unexpected medium and long-term cost-reduction potential. “Offshore wind energy is categorically proving its competitiveness. This is good news for all electricity consumers,” he said in a statement. 

He added a word of caution, however, noting that it remained to be seen whether the prices in the next auction would be as low.

Edited by

Andrew Dykes

Editor

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