Germany has held its first competitive auction for offshore wind projects, which resulted in an average bid price well below expectations. In a ground-breaking move, two of the four successful projects were submitted with a zero-subsidy bid, which means they will not receive a subsidy above the wholesale electricity price. The auction was held by the German market regulator, the Bundesnetzagentur, which announced the auction results to be a weighted price of 0.44 euro cents per kWh. Four bids were accepted with a total capacity of 1,490 MW. They are all to be commissioned in 2024 and will be located in the North Sea. Jochen Homann, Bundesnetzagentur President, said, “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”. The subsidy-free bids, placed by DONG Energy for two of its three projects, represent a breakthrough for offshore wind. Analysts report that grid connection costs were not included, which enabled low bid prices, as well as the projects being located in an area of high wind speeds.
In the UK, the Contracts for Difference (CfD) scheme is now the main support mechanism for renewables. The second round of the auction scheme was launched in early April and will run until the autumn. Renewable energy developers will compete for £290m worth of contracts for projects to be delivered in either 2021-22 or 2022-23. The subsidy-free projects in Germany provide a positive signal to global investors and to policy makers. The Department for Business, Energy and Industrial Strategy (BEIS) was expected to publish its long-anticipated emissions reduction plan over the next few months, although this could now be delayed by a general election. This plan will establish a framework to meet the UK Carbon Budget of a 57% reduction in emissions by 2030 against 1990 levels. A long-term emission reduction plan, combined with clarity on the scheduling of Contracts for Difference auctions, would provide certainty to UK investors. The environmental law firm ClientEarth has written an open letter to the government calling for a timeframe for the release of the Emissions Reduction Plan, requesting a response within 21 days.
