Dong Energy has won a bid to construct three wind projects in an auction conducted by Germany’s Federal Network Agency, Bundesnetzagentur.
The company will construct the wind farms in the German North Sea including the 240 MW OWP West, the 240 MW Borkum Riffgrund West 2, and the 110 MW Gode Wind 3.
Commissioning of the three projects is expected to take place by 2024 and they are subject to final investment decision by Dong Energy in 2021.
For two projects out of the three, OWP West and Borkum Riffgrund West 2, Dong Energy made bids at zero per MWh, which means that the Danish energy company will not receive any subsidy more than the wholesale electricity price.
More importantly, the weighted average bid came out to be €0.44 per KWh, which Bundesnetzagentur noted to be much less than expected. It also stated the low bidding suggests that there is intense competition.
Bundesnetzagentur stated that it accepted four bids, taking into account the total volume for the auction of 1.55GW and grid connections.
Bundesnetzagentur president Jochen Homann said: "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.
"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."
DONG Energy Wind Power executive vice president and CEO Samuel Leupold said: “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.
“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.”
Leupold continued: “Financial discipline is key to us. We are of course reflecting the project’s exposure to market risk in the cost of capital applied. We see a solid value creation potential in this German project portfolio and will now begin to further mature the projects towards a Final Investment Decision (FID) in 2021.”
Image: Dong Energy wins auction to build German offshore wind farms. Photo: Courtesy of DONG Energy A/S.