The Danish Energy Agency announced yesterday that the 3 GW Danish North Sea offshore wind tender drew no bids from developers, a result that is disappointing to the industry and a setback for Denmark’s offshore wind targets and ambitions. The lack of interest in the rounds can be seen as sending a negative signal of failure for the market, however, the full picture of the results is more nuanced, with several factors at play.

The round characteristics did not meet the needs and demands from developers under current market conditions. A main point of focus is the lack of subsidies or secured offtake agreements on offer in the rounds. Several mature markets, including Denmark, Germany and the Netherlands runs offshore wind tenders without offering subsidy support. Recently, we have seen a clear trend of less interest in these rounds. Both the latest Dutch and German areas were awarded to developers, but not being close to as competitive as 2-3 years ago. With the last years seeing a significant increase in project costs and projects coming under increasing economic pressure, the lack of an offtake at a secured price can be deemed too risky for developers.

The year has also seen a record number of markets offering offshore wind projects to developers, having been awarded an impressive 63.1 GW of offshore wind capacity. The number of opportunities enables developers to be more selective in where to place their bids. With the number of options on offer, there will also naturally be some degree of market saturation in terms of demand and interest from developers, reaching a limit in terms of willingness to take on the new projects.

In terms of the results of the Danish rounds, all is not negative. Although a disappointing results for the Danish state and its offshore wind targets, the results also signal that developers are being more selective and focusing on the economics of their projects. Perhaps not ideal of Denmark now, its key for the continued sustainability for the industry that the profitable and viable projects are pushed through, and going forward, it will be up to both developers and policymakers, though consultation with the industry stakeholders, to secure this on new projects on offer.  

Image Source: RWE