A photo of the Borkum Riffgrund 1 offshore wind farm

Bundestag Passes New Offshore Wind Rules in Germany, Industry Points to Challenges

On 7 July, the German Bundestag passed an amendment of the Wind Energy at Sea Act (WindSeeG) that includes several new criteria for future offshore wind tenders, including the so-called “negative bidding”, qualitative criteria focused on decarbonisation, supply chain, and workforce, as well as project buildout specifically targeted for green hydrogen production.

Borkum Riffgrund 1; Photo source: Ørsted (archive)

The new Act introduces a two-track auction system, with one track auctioning sites pre-surveyed by state authorities while the other track is for sites that are not pre-developed.

The upcoming two offshore wind auctions in Germany, scheduled for June and August 2023, will be for centrally pre-developed sites and will be auctioned with included qualitative criteria, which will bring 40 out of the 100 possible points, the remaining 60 points being awarded for the bidding price.

The qualitative criteria includes the use of green electricity in the production of the wind turbines, green hydrogen production, an education and training quota, the conclusion of a power purchase agreement, and biodiversity and nature protection in the installation of the wind turbines.

For the sites that are not pre-developed, the WindSeeG introduces auctions that are solely based on price and allow for negative bidding, with no cap on how much developers can bid to pay.

Negative Bidding a ‘Central Weakness’ of Amended Act, Industry Says

The new tender design, which puts the price for the expansion of areas in the North and Baltic Seas first, is a “central weakness” of the amended Act, the industry organisations BWE, BWO, Stiftung OFFSHORE-WINDENERGIE, VDMA Power Systems and WAB said in a joint comment.

As reported earlier, WindEurope also warned about the potential impact of the uncapped negative bidding, saying the costs would ultimately be passed on the consumers and/or the wind industry supply chain.

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The European wind energy industry organisation now reiterated its standpoint, saying that even higher energy bills are the last thing consumers want and more pressure on costs is the last thing Europe’s turbine manufacturers want.

WindEurope again reminded that all five of the wind turbine manufacturers are currently operating at a loss today, with inflation in material costs and supply chain disruptions.

“The German Government had proposed to introduce Contracts-for-Difference (CfD), a model successfully used by many other European countries. Just last week the UK auctioned 11 GW of new renewables via its CfD scheme. But the German Parliament have now dropped that. And we’re left with a model that allows for uncapped negative bidding. That’s bad. Negative bidding increases the costs for offshore wind. That’s bad for consumers and bad for the wind energy supply chain”, said WindEurope CEO Giles Dickson.

The German wind energy and hydrogen organisations this bidding component should be removed or capped.

“Cost pressure on the value chain, which is already weakened by the lack of expansion, will also increase – depending on the orientation of the project developers”, said BWE, BWO, Stiftung OFFSHORE-WINDENERGIE, VDMA Power Systems and WAB.

“The federal government and the offshore wind industry cannot afford fundamental mistakes in the tender design if the first stage target for 2030 is to be achieved. The bidding component must therefore be abolished as soon as possible or capped as in the Netherlands”.

The country’s industry organisations highlighted the fact that offshore wind buildout is now picking up, after no new capacity was installed in 2021 and in the first half of this year, and that Germany needs to make the system work for everyone if it wants to achieve its increased offshore wind targets.

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“Due to the freeze on expansion in recent years, Germany has fallen behind in international comparison. This makes it all the more important to have a functioning system that removes obstacles in the international competition for resources, skilled workers and investors”, the organisations said. 

500 MW of Offshore Wind Tendered Annually for Green Hydrogen Production

BWE, BWO, Stiftung OFFSHORE-WINDENERGIE, VDMA Power Systems and WAB welcomed the other changes in the new Act, including the ramp-up of hydrogen production from offshore wind.

As stipulated in the new Act, Germany will procure offshore wind power for green hydrogen production through six annual tenders of 500 MW of installed capacity from 2023.

This plan is an important step for the ramp-up of the green hydrogen economy, the German industry organisations said, adding that it also remains important that production must be economically feasible in order to quickly achieve the necessary scaling.

The organisations also noted that the industry expects to be “closely involved at an early stage in the development of the tender design this time”.

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