Germany Accepts First Subsidy-Free Offshore Wind Auction Bid

Germany’s Bundesnetzagentur has selected three offshore wind projects by DONG Energy and one project by EnBW in the first auction for grid connections and funding for existing offshore wind farm projects, with at least one of the developers offering the lowest price bid of 0.00 Euro cents per kilowatt-hour.

The agency selected four offshore wind projects with a combined capacity of 1,490MW, including EnBW’s 900MW He Dreiht, and DONG’s Borkum Riffgrund II West, Gode Wind 3, and OWP West offshore wind farm.

The average award price was 0.44 Euro cents per kWh, and the highest price accepted was 6.00 Euro cents per kWh. All four projects are in the North Sea.

“The average weighted award price of 0.44 cents per kilowatt hour is far below expectations. This shows the auction has unlocked medium and long-term cost reduction potential, which will lead to a reduction in funding to an extent that had not been expected,” said Jochen Homann, Bundesnetzagentur President, commenting on the outcome of the auction.

“Offshore wind energy is categorically proving its competitiveness. This is good news for all electricity consumers who contribute to funding renewable energy through the renewable energy surcharge. It remains to be seen, however, whether the prices in the next auction will be as low.”

The results reflect the very high intensity of competition in this auction round: bids are eligible in the two rounds in 2017 and 2018 from projects in the North and Baltic Seas comprising a total volume of around 6,000MW to 7,000MW, with the volume for auction in both rounds amounting to 3,100MW.

Moreover, investments have already been made into developing the projects, and so the question now facing the investors is how to factor these investments into their calculations. In addition, the project developers can expect further significant reductions in costs to be achieved before the wind farms are put into operation between 2021 and 2025.

Successful projects are entitled not only to funding under the Renewable Energy Sources Act, but also to grid connection – financed through the network charges by the electricity consumers – and the possibility to operate the wind farms for 25 years. This, too, involves a considerable amount of funding.

The second auction for existing offshore wind farm projects will take place on 1 April 2018. The volume for auction will again be 1,550MW, plus the 60MW not awarded in the first auction. The total volume available in the second auction will therefore be 1,610 MW.

This includes a minimum of 500MW to be awarded as required by the Offshore Wind Energy Act for offshore wind farms in the Baltic Sea. Bids can be placed in the second auction again for projects that were not awarded funding in the first auction.

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