Cheaper Offshore Wind to Cut Dutch Subsidies by EUR 2 Billion?

The Dutch government could spend up to EUR 2 billion less than planned on subsidies for energy generated by offshore wind as the costs to build and operate offshore wind farms have fallen sharply in recent years, according to the Financieele Dagblad (FD). 

Source: DONG Energy

The country’s Energy Agreement from 2013 stipulated that up to EUR 18 billion of state aid in form of subsidies for offshore wind farms will be needed if the Netherlands is to meet its goal to build 4,450MW of offshore wind capacity through the construction of five large offshore wind farms by 2023.

Dutch Minister of Economic Affairs Henk Kamp lowered this initial estimate to EUR 12 billion last year.

However, it seems that the last year’s estimate could be off by EUR 2 billion, FD reported Simone van Gendt, head of export and project finance markets with Rabobank, as saying.

The main reason for the even lower estimate is the recently closed tender for the development of the 700MW Borssele I and II wind farms which Denmark’s DONG Energy won, offering a lower-than-expected bid strike price.

The company won the concessions with an average bid strike price excluding transmission costs of 7.27 Euro cents per kilowatt hour for the first 15 years of the contract, 5.1 Euro cents below the maximum price cap set by the Dutch government.

The winning bids in the Borssele III and IV tender, scheduled to open in the second half of September 2016, are expected to provide a similar bid strike price.

If DONG’s winning bid is taken as a blueprint of what the bids for the remaining wind farms should offer, the overall sum the Dutch government would need to set aside for subsidies would be around EUR 10 billion, according to van Gendt.

Offshore WIND Staff