New Danish offshore wind farm tenders opening

Last summer Belgium achieved a total of 1.775MW installed offshore wind capacity with the completion of Northwester 2 and therefore surpassed Denmark which has 1.703MW installed power. Both countries have wind farms that are to be completed by the end of 2020.

Denmark has the goal of expand the offshore wind farm capacity by at least 2.400MW by 2030 and will tender for three offshore wind farms.

Denmark has initiated the tender process of two new offshore wind farm projects, Thor and Hesselø.

The tender process will be tender with negotiation and pre-qualification like in previous Danish offshore wind tenders such as Horns Rev 3 and Kriegers Flak. This tender process has been successful in allowing bidders to influence tender conditions, ensured optimal sharing of risk, ultimately achieving very competitive bid prices for the Danish economy. Moreover, pre- investigations of the selected site will be carried out prior to deadline for bids in order to minimize risk for the developers. The scope will be as before in DK; wind turbines, foundations and array cables. Energinet will continue having the responsibility of constructing and operating the onshore grid connection from the onshore substation to the overall transmission grid. The winner of the tender must pay Energinet (Danish grid operator) for the cost of constructing the onshore grid connection (subject to the approval from the European Commission). A license for the electricity production and authorisation will be granted for 30 years with the possibility of a five-year extension, if allowed under the applicable regulation.

The Thor offshore wind farm project pre-qualification is open until December. The bids are expected to be submitted in mid-March 2021 for this project where the developers can bid for a minimum capacity of 800MW and a maximum capacity of 1000MW. The grid connection is expected to be ready in Q1 2025 and the wind farm will have to be built by end 2027.

Energistyrelsen (Danish Energy Agency) has issued tender material that include wind resource assessment and site surveys for the approved developers. Including in that material is an estimation of the danish electricity price over the coming years that can be seen in the graph below. (Source: Energistyrelsen)

Based on their predictions they have also estimated what will be the amount of subsidy they would need to finance for the successful bidder as the subsidy scheme will be a CfD (contract for difference). The award criteria is simply lowest price on kWh and the bids are automatically accepted. The scheme is a two-way CfD with caps on both the Danish State’s payment to the developer and the concession owner’s payment to the Danish State. Therefore there will be a prevention that neither one carries the full risk of the electricity price developing fundamentally different from the forecast. The overall cost estimates for 800MW and 1000MW wind farms can be seen below (Source: Energistyrelsen).

Vattenfall was the successful winner of the Kriegers Flak bidder with a bid price of 49.9 EUR/MWh for the 600MW wind farm in the Baltic Sea.

We have made the analysis for both Thor and Hesselø offshore wind farms with the technical parameters expecting a zero-subsidy bid for the developers and the expected wind turbines that will be available for installation after 2025 and the results can be seen in the YOUWIND model project list.

Results show that zero-subsidy is still profitable for the developers so we expect a great competition for this bid. For further information please contact us.