Germany defies expectations with highly competitive offshore wind auction, as Shell urges Netherlands to scale up offshore wind ambition
Germany’s first competitive auction for offshore wind projects has delivered an average bid price “far below expectations”, with experts saying at least one project will deliver subsidy-free power.
Leading developers DONG Energy and EnBW were amongst the big winners as Germany’s federal energy markets regulator, Bundesnetzagentur, announced yesterday the average weighted price achieved through the auction of 0.44 cents per kWh was well below expectations.
The regulator said the bids demonstrated that offshore wind energy is “categorically proving its competitiveness”.
Four bids were accepted in the auction for a total capacity volume of just under 1.5GW, with EnBW even securing 900MW with a bid of zero – meaning the Germany energy firm has pledged to develop its proposed He Dreiht offshore wind farm without any subsidy, relying instead on the market rate for it powers.
It means the He Dreiht project, which is scheduled to come into operation in 2025, is one of the first offshore wind farms in the world to be developed without state subsidy.
EnBW CEO Frank Mastiaux said his firm, which already has around 336MW of offshore wind capacity in operation in the German North Saw, was “extremely pleased” with the result.
“Our bid demonstrates that integrating offshore technology into the market by the middle of the next decade is possible and that offshore wind energy can make a significant contribution towards Germany meeting its energy and climate policy targets,” he said.
Danish giant Dong Energy, meanwhile, secured 590MW in the auction to develop its Borkum Riffgrund West 2, Gode Wind 3 and OWP West offshore wind projects.
Jochen Homann, Bundesnetzagentur president, said the auction had “unlocked medium and long-term cost reduction potential, which will lead to a reduction in funding to an extent that had not been expected”.
He added that another auction for 1.55GW would be held in April 2018.
“This is good news for all electricity consumers who contribute to funding renewable energy through the renewable energy surcharge,” Homann said. “I
t remains to be seen, however, whether the prices in the next auction will be as low.”
Hannah Martin, head of energy at Greenpeace UK, said the news was “a watershed moment for the world’s renewable energy market”.
“Offshore wind has the potential for huge global growth from the USA to Taiwan as the technology massively improves, costs fall and governments wake up to the economic potential,” she said. “The UK government should take note of other countries who are benefiting from this booming offshore technology and jump on board with both feet while we are still leaders in the field.”
In related news, Shell has called on the Dutch government to increase its offshore wind ambition in order to help cut development costs.
Reports suggested the oil giant was calling on the government to quadruple the country’s offshore wind capacity target to 20GW by 2030.
Europe’s biggest oil company is seeking to increase its renewable energy investments worldwide to $1bn a year by 2020 as it begins to decarbonise its business model, and recently won a contract as part of a consortium to build a 700MW wind far off the coast of the Netherlands.
The Dutch government is currently looking to build around 4.5GW of offshore wind capacity up to 2030, but its overall renewable energy investments are behind that of many of its neighbours, and the Anglo-Dutch oil firm is therefore lobbying for more ambition in order to provide greater long-term clarity for investors.
“We need to lower the costs of development, but we would also want the Dutch government to come up with the policy for a further rollout of 10-15GW in capacity for the period until 2030,” Reuters reported a spokeswoman for Shell in the Netherlands as saying.
The developments come as a UK report yesterday argued that onshore wind projects could deliver new capacity that could be reasonably classified as ‘subsidy-free’ if the government provided developers with a route to market.