‘Europe is falling behind’ – WindEurope reacts to Dutch wind auction blow

The recent wave of cancelled or snubbed offshore wind auctions needs to be addressed, or Europe will fall further behind in its electrification drive, it said.

Electrification is central to the continent’s competitiveness and energy security, WindEurope’s Press and Communications manager Christoph Zipf told Maritime Journal, but governments must switch from the negative bidding auction model for offshore wind projects to Contracts for Difference if they want to attract bidders.

An offshore auction held by the Netherlands last week confirmed it did not receive a single bid, in an echo of similar recent scenarios in Germany, Denmark and the UK and also partially in France.

Zipf said that each auction has to be taken on its own merits – or lack of merits – they cannot really be compared and ’have to be understood based on their national specifics (auction design, political situation, electricity demand)’.

However, at the heart of much of the reluctance to go ahead was the negative bidding model, which was the case in the Dutch example, he said.

Negative bidding is where the developer essentially pays the government for the right to build the wind farm in the hope there will be enough profit over an initially agreed price. With Contracts for Difference (CfDs), a ‘strike’ price is agreed for what the developer is paid per MWh: if it falls below, the government pays him the difference and if it goes above, the developer pays the government.

“It’s not surprising that the Dutch offshore wind tender has failed,” Zipf said. “Under the current market realities offshore wind developers just can’t be asked to pay for the right to build a wind farm. The Netherlands has understood that. It has launched an Action Plan for offshore wind, is waving goodbye to negative bidding and switching to Contracts for Difference.

“The incoming Dutch Government must stay the course and make this switch a top policy priority. It should also provide a long-term budget in the form of an offshore wind fund for all income and expenditure from offshore wind CfDs.”

The government has, he said, announced the switch to CfDs and set up a temporary support mechanism for the transition to them.

“The Netherlands remains a highly attractive market for offshore wind,” he said. “Offshore wind developers will return to the Dutch market once these improvements are in place. But the incoming government must ramp up the electrification of the Dutch economy. Additional electricity demand from direct electrification will keep the costs of offshore wind as low as possible.

“Electrification is central to our competitiveness and energy security.”