Inclusion of negative bidding in recent offshore wind auctions held by Germany and the Netherlands is “putting unnecessary additional pressure” on offshore wind developers, according to WindEurope.
Germany recently awarded 2.5GW and the Netherlands 4GW, with countries using negative bidding, where wind farm developers bid the amount of money they’re ready to pay for the right to build a wind farm with higher prices being bid more likely to secure project sites.
Most other countries in Europe use Contract for Difference (CfD) auctions where developers bid the amount of revenue they think they need, and the lowest bid wins.
In a negative bidding auction an offshore wind farm’s revenue will be whatever is the wholesale market price of electricity, while a CfD auction ensures revenue will be the successful bid and if market prices are higher than the agreed strike price, the difference is paid to the Government.
WindEurope has described negative bidding amounts as a “straight add-on to the costs of developing an offshore wind farm”, in other words “extra money” the developer has to pay which would not be paid in a CfD auction.
TotalEnergies will pay €1.958bn to develop the N-11.2 site which has a capacity of around 1.5GW.
EnBW will pay €1.065bn to develop the roughly 1GW N12.3 site.
In the latest Dutch auction UK-based SSE Renewables and the Dutch state pension fund APG and ABP will pay €40m to develop the 2GW IJmuiden Ver Alpha site.
Vattenfall and Copenhagen Infrastructure Partners will pay €800m to develop the 2GW IJmuiden Ver Beta site.
“Negative bidding increases the costs of offshore wind. Costs that have to be passed on to consumers and the wind energy supply chain.
“It may be a short-term gain for finance ministries but it’s a long-term cost for society,” said WindEurope CEO Giles Dickson.
The Dutch auction made extensive use of non-price criteria.
For the Alpha site these were about biodiversity protection, while for the Beta site it was system integration.
Vattenfall and CIP have among other things committed to build a 1GW electrolyser facility in Rotterdam which will run on renewable electricity from the Beta site, while the Alpha wind farm is designed as a “living laboratory” which will have artificial reefs for muscles and other maritime animals.
“The Dutch auction shows the European wind industry has a great offering on ecology and system integration.
“We are building new wind farms and creating lasting value for Europe’s environment and energy system,” said Dickson.
In Germany 90% of the money raised from negative bidding will be used to reduce the grid levies, while the remaining 10% is used to support maritime biodiversity and sustainable fishing practices.