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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Offshore wind may be the main driver for Europe achieving its shift to renewable energy, but it's not all plain sailing as recent offshore wind tenders in a number of countries show.
In a week of contrasts, Lithuania's National Energy Regulatory Council (NERC) canceled its second tender for a 700-megawatt (MW) offshore windfarm in the Baltic Sea after receiving only one bid while Denmark announced its largest-ever offshore wind tender, seeking at least 6 gigawatts (GW) and potentially up to 10 GW. The failure in the Lithuanian tender echoed what happened in the U.K. last September when the government's offshore tender for up to 5 GW of windfarms failed to receive a single bid from offshore wind developers. This was despite the U.K. being the largest offshore wind nation in Europe. For additional information, see September 26, 2023, article - U.K. Fails to Attract Any Offshore Wind Bidders.
Lithuania's renewable energy laws stipulate that there be at least two bidders for a tender to take place. The low turnout was attributed in part to changes in the bidding process and the impact of the regional geopolitical landscape making such investments less favorable. Offshore financing in Europe is also being hit by higher interest rates, higher equipment costs and supply chain disruption after the pandemic. Lithuania's Minister of Energy Dainius Kreivys, said: "The second 700 MW offshore windfarm is a project of strategic importance and absolutely necessary for Lithuania's energy independence; therefore, after consultations with market players, the tender will be relaunched as soon as possible. During these consultations we need to find out what specific conditions would maximize the attractiveness of the project and increase its resilience to market fluctuations." Lithuania is aiming to have two offshore windfarms with a combined capacity of 1.4 GW, which will supply up to 50% of the country's electricity.
In Denmark, which built the first offshore windfarm 33 years ago at Vindeby, the latest tender will greatly expand the country's current offshore capacity of 2.7 GW by at least 6 GW and up to 10 GW. The government wants six windfarms of at least 1 GW each to be located in the zones of Nordsoen I (three sites), Kattegat, Kriegers Flak II and Hesselo. Described by the Danish Energy Agency as "a massive investment in the green transition," it will result in an investment of US$14 billion. "Finally, we can press the button and open the largest offshore wind supply in Denmark's history," said Climate, Energy and Supply Minister Lars Aagaard. "With turbines in the hundreds, we are preparing ourselves against Putin's black gas, and today Denmark has come closer to becoming Europe's green powerhouse. When the turbines spin, we can cover all of Denmark's electricity consumption with green electricity-- and we can produce hydrogen and green fuels for ships and planes. It is projects on this scale that can make a big green difference, for the climate and for our safety. Not just for Denmark, but for the whole of Europe."
Investments in offshore wind alone in 2023 accounted for more than 30 billion euro (US$32.5 billion), a major recovery for the sector, which saw investment in 2022 all but collapse to 400 million euro (US$434 million) due to the impact of the Russian invasion of Ukraine, impacts on the supply chain and the Europe-wide gas crisis, according to wind industry association WindEurope. Industrial Info is tracking almost 280 offshore wind projects in Europe, with a potential investment value in excess of US$698 billion. Subscribers to Industrial Info's Global Market Intelligence (GMI) Project Database can click here for the reports.
WindEurope highlighted that, if all countries run their 2024 auctions as planned, at least 40 GW will be auctioned this year. Germany, Denmark, the U.K., France and the Netherlands are the top five countries auctioning capacity over the next two years. France is also expected to announce the results of Europe's first commercial-scale floating offshore wind tender. Germany will auction 8 GW in 2024 alone. As a comparison: Europe auctioned 13.5 GW of new offshore wind capacity in 2023. WindEurope believes the bidding system in place today has to change to secure future offshore projects. "70% of all auctions in 2023 used uncapped negative bidding, asking wind energy developers to pay for the right to build an offshore wind farm. This needs to change. Uncapped negative bidding poses several big risks. Developers have to cover the additional costs of negative bids. They can either pass them on to the electricity consumers, who are already suffering from high prices, or on to the wind energy supply chain, which is already struggling with inflation and cost increases. Negative bidding also adds to the overall project risk which in turn drives up capital costs. This is particularly challenging with higher interest rates now. As a result, uncapped negative bidding puts the realization of projects at risk."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
In a week of contrasts, Lithuania's National Energy Regulatory Council (NERC) canceled its second tender for a 700-megawatt (MW) offshore windfarm in the Baltic Sea after receiving only one bid while Denmark announced its largest-ever offshore wind tender, seeking at least 6 gigawatts (GW) and potentially up to 10 GW. The failure in the Lithuanian tender echoed what happened in the U.K. last September when the government's offshore tender for up to 5 GW of windfarms failed to receive a single bid from offshore wind developers. This was despite the U.K. being the largest offshore wind nation in Europe. For additional information, see September 26, 2023, article - U.K. Fails to Attract Any Offshore Wind Bidders.
Lithuania's renewable energy laws stipulate that there be at least two bidders for a tender to take place. The low turnout was attributed in part to changes in the bidding process and the impact of the regional geopolitical landscape making such investments less favorable. Offshore financing in Europe is also being hit by higher interest rates, higher equipment costs and supply chain disruption after the pandemic. Lithuania's Minister of Energy Dainius Kreivys, said: "The second 700 MW offshore windfarm is a project of strategic importance and absolutely necessary for Lithuania's energy independence; therefore, after consultations with market players, the tender will be relaunched as soon as possible. During these consultations we need to find out what specific conditions would maximize the attractiveness of the project and increase its resilience to market fluctuations." Lithuania is aiming to have two offshore windfarms with a combined capacity of 1.4 GW, which will supply up to 50% of the country's electricity.
In Denmark, which built the first offshore windfarm 33 years ago at Vindeby, the latest tender will greatly expand the country's current offshore capacity of 2.7 GW by at least 6 GW and up to 10 GW. The government wants six windfarms of at least 1 GW each to be located in the zones of Nordsoen I (three sites), Kattegat, Kriegers Flak II and Hesselo. Described by the Danish Energy Agency as "a massive investment in the green transition," it will result in an investment of US$14 billion. "Finally, we can press the button and open the largest offshore wind supply in Denmark's history," said Climate, Energy and Supply Minister Lars Aagaard. "With turbines in the hundreds, we are preparing ourselves against Putin's black gas, and today Denmark has come closer to becoming Europe's green powerhouse. When the turbines spin, we can cover all of Denmark's electricity consumption with green electricity-- and we can produce hydrogen and green fuels for ships and planes. It is projects on this scale that can make a big green difference, for the climate and for our safety. Not just for Denmark, but for the whole of Europe."
Investments in offshore wind alone in 2023 accounted for more than 30 billion euro (US$32.5 billion), a major recovery for the sector, which saw investment in 2022 all but collapse to 400 million euro (US$434 million) due to the impact of the Russian invasion of Ukraine, impacts on the supply chain and the Europe-wide gas crisis, according to wind industry association WindEurope. Industrial Info is tracking almost 280 offshore wind projects in Europe, with a potential investment value in excess of US$698 billion. Subscribers to Industrial Info's Global Market Intelligence (GMI) Project Database can click here for the reports.
WindEurope highlighted that, if all countries run their 2024 auctions as planned, at least 40 GW will be auctioned this year. Germany, Denmark, the U.K., France and the Netherlands are the top five countries auctioning capacity over the next two years. France is also expected to announce the results of Europe's first commercial-scale floating offshore wind tender. Germany will auction 8 GW in 2024 alone. As a comparison: Europe auctioned 13.5 GW of new offshore wind capacity in 2023. WindEurope believes the bidding system in place today has to change to secure future offshore projects. "70% of all auctions in 2023 used uncapped negative bidding, asking wind energy developers to pay for the right to build an offshore wind farm. This needs to change. Uncapped negative bidding poses several big risks. Developers have to cover the additional costs of negative bids. They can either pass them on to the electricity consumers, who are already suffering from high prices, or on to the wind energy supply chain, which is already struggling with inflation and cost increases. Negative bidding also adds to the overall project risk which in turn drives up capital costs. This is particularly challenging with higher interest rates now. As a result, uncapped negative bidding puts the realization of projects at risk."
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
