German auction attracts first subsidy-free offshore wind deal | RenewEconomy

German auction attracts first subsidy-free offshore wind deal

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Germany’s first competitive auction for offshore wind projects included what is likely one of the world’s first subsidy-free offshore wind projects.

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Germany’s first competitive auction for offshore wind projects has not only delivered an average bid price that was “far below expectations” according to the Bundesnetzagentur, but also included what is likely one of the world’s first subsidy-free offshore wind projects.

Germany’s federal energy markets regulator, the Bundesnetzagentur, announced Thursday the results of its first auction for offshore wind farms — which included bids for grid connections and funding for existing offshore wind farm projects.

According to the Bundesnetzagentur, the average weighted average was 0.44 Euro cents per kilowatt hour ($A0.0061/kWh), which was “far below expectations.” (Please note that this bid reflects the price over and above the wholesale price, so it is indeed less than one cent per kilowatt hour)

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. “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.”

A total of four bids were accepted, with a total volume up for auction of 1,490 megawatts (MW) (out of a possible 1,550 MW), all located in the North Sea.

DONG Energy was awarded the right to build three offshore wind projects in the German North Sea, for a total capacity of 590 MW: They were the 240 MW OWP West, the 240 MW Borkum Riffgrund West 2, and the 110 MW Gode Wind 3. All three projects are expected to be commissioned in 2024.

“We’re pleased with being awarded three projects in the first of two German auction rounds, and we have good opportunities to add further capacity to our winning projects in next year’s German auction,” said Samuel Leupold, Executive Vice President and CEO of Wind Power at DONG Energy. “Today’s results contribute to our ambition of driving profitable growth by adding approximately 5GW of additional capacity by 2025.”

Most importantly, however, for two of the projects — OWP West and Borkum Riffgrund West 2 — DONG Energy made bids of zero, meaning that these two projects will not receive, nor need government subsidy on top of the wholesale electricity price. The Gode Wind 3 project was awarded on a bid price of €60 per MWh.

“The zero subsidy bid is a breakthrough for the cost competitiveness of offshore wind, and it demonstrates the technology’s massive global growth potential as a cornerstone in the economically viable shift to green energy systems,” Samuel Leupold continued.

“Cheaper clean energy will benefit governments and consumers – and not least help meet the Paris COP21 targets to fight climate change. Still it’s important to note that the zero bid is enabled by a number of circumstances in this auction. Most notably, the realization window is extended to 2024. This allows developers to apply the next generation turbine technology, which will support a major step down in costs. Also, the bid reflects the fact that grid connection is not included.”

DONG Energy wasn’t the only big winner, nor the only winner to present a zero bid. EnBW received approval for its 900 MW He Dreiht offshore wind farm, which was won at a bid of zero.

“We are extremely pleased with this result,” said EnBW CEO Frank Mastiaux.

“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. Following on from very good energy yields, offshore technology has also made a quantum leap in terms of efficiency to now qualify as a true driver of the German Energiewende. He Dreiht thus demonstrates our clear commitment to the further responsible and cost-efficient expansion of offshore wind energy and symbolises our contribution to the Energiewende”

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  1. Tom 3 years ago

    0.0044 EUR = 0.0062 AUD /kWh
    Cents not Euro. i.e. subsidy is next to nothing not outrageously high ($0.61/kWh in article).

    • Giles 3 years ago

      Quite right. thanks for pointing out. Fixed.

      • Mark Diesendorf 3 years ago

        There still seems to be an error in the second paragraph: replace 0.44 Euro cents by 4.4 Euro cents.

  2. Tim Buckley 3 years ago

    This is a huge breakthrough in getting the cost competitiveness of offshore wind right. Euro44/MWh is amazingly competitive, particularly given China has been waiting in the wings for the last five years for the cost to come down, ready to ramp up their own offshore installation activity over the next five years, replicating and then building on this technology innovation and adding economies of scale. Taiwan, then Japan and Korea are all heavily evaluating this newish technology for deployment at scale over 2020-2030.

  3. Mark Diesendorf 3 years ago

    Agreed, the number in the original report (in German) is indeed 0.44 Eurocents/kWh, but that’s too tiny by an order of magnitude to be a bid for the price of electricity. Checking the original report, 0.44 Eurocents/kWh is not described as a bid (Gebotswert) but as a ‘surcharge’ (Zuschlagswert). However, the maximum of 6 Eurocents/kWh is described as a bid (Gebotswert). It’s confusing! My guess is that the 0.44 Eurocents/kWh is a feed-in tariff or something similar. Could someone who understands the German reverse auction system and speaks fluent German elucidate further? But let’s not delude ourselves that off-shore wind costs 0.44 Eurocents/kWh.

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