The cost of building and operating the 700MW Borssele 1 and 2 offshore wind farm is expected to be EUR 2.7 billion cheaper than previously estimated. Moreover, the wind farm will generate 22.5% more electricity than anticipated.
Fierce competition between companies in the public tender to secure the permit and associated subsidy to build and operate the wind farm resulted in achieving the lower than anticipated price, thus making the project cheapest worldwide, according to a statement by the Dutch government following the announcement on DONG Energy placing the winning bid for the project.
Under the Dutch system, interested market parties could bid in the subsidy and permit tender, with a maximum price cap set at 12.4 Euro cents per kilowatt hour. Overall, there were 38 bids, with DONG Energy submitting the lowest bid with an average of 7.27 Euro cents per kilowatt hour – 5.1 Euro cents less than the originally estimated compensation. This results in a cost reduction of EUR 2.3 billion over the 15-year period that the SDE+ subsidy compensation is available, the government pointed out.
Until now, the lowest auction price for constructing and operating an offshore wind farm was 10.3 Euro cent per kilowatt hour, for a wind farm off the coast of Denmark.
The Dutch Minister of Economic Affairs, Henk Kamp, said: “Worldwide it has never happened before that an offshore wind farm can be built at such low cost. The Dutch system in which companies have to compete with each other while the government regulates all conditions for building the wind farm has proved to be very successful. This reduction of cost represents a major breakthrough in the transition to more sustainable energy.”
The Dutch government regulates all conditions for the construction of the wind farms: the exact location, consents, the connection to the electricity grid. Further, the government makes an operating grant available. Producers receive financial compensation for the renewable energy they generate. In the subsidy and permit tenders the lowest bid is awarded with the tender winner receiving a permit to build and operate an offshore wind farm and being granted the associated subsidy. This makes the construction of the wind farms cheaper, the Dutch government explained.
Previously, companies had to receive consents before they could compete for the grant and had to install the export cables to shore themselves. Now TenneT, the Dutch transmission system operator, takes care of the offshore grid connections.
The Borssele 1 and 2 wind farm, to be constructed more than 22 km off the coast of the province of Zeeland, is expected to be built by mid-2020 and provide electricity for one million households.
A greater part of the construction of the new wind farm in the Borssele Wind Farm Zone is expected to be conducted from the port of Vlissingen.
It is expected that the tender for the second wind farm (Borssele Wind Farm Sites III and IV) will be closed in the last week of September 2016. After that, from 2017, the development of wind farms off the coast of the provinces of South Holland and North Holland is foreseen.