GAME-CHANGING LEAP FORWARD
The wind energy sector took a game-changing leap forward this week when two leading developers announced that they will be building the world’s first offshore windfarms without government financial aid.
GERMANY’S FIRST WIND POWER AUCTION
In the first German wind power auction, three of the four windfarms accepted will be built with no financial help. DONGEnergy A/S and EnBW became the first energy companies to propose “zero sum” subsidy windfarms. They will rely on wholesale electricity prices to make their investment money back instead of relying on government funding. Traditionally, windfarms have enjoyed heavy government financial assistance getting built, in the form of a premium price paid for electricity generated over a long period of time.
The average price achieved in the auction was 0.44 euro cents per kilowatt hour (KWh). That amount is well under the limit of 12 euro cents per KWh, demanded by the grid regulator BNetzA in February when it launched the auction.
“The average weighted award price of 0.44 cents per kilowatt hour is far below expectations,” said Jochen Homann, BNetzA President. “This shows the auction has unlocked medium and long-term cost reduction potential, which will lead to a reduction in funding to an extent that had not been expected. 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. It remains to be seen, however, whether the prices in the next auction will be as low.”
OWP WEST, BORKUM II AND HE DREIHT WINDFARMS
DONG will build the 240-megawatt (MW) OWP West and the 240-MW Borkum Riffgrund West 2 offshore windfarms, while EnBW will build the 900-MW He Dreiht offshore windfarm without subsidies. It should be noted that the zero-sum bids were aided by the fact that in German waters the companies do not have to pay the expensive grid connection fees that add to the cost of projects in other European countries. In the same auction, DONG was also awarded a contract for the 110-MW Gode Wind 3 project based on a bid price of 60 euro per megawatt hour (MWh).
“The zero-subsidy bid is a breakthrough for the cost competitiveness of offshore wind, and it demonstrates the technology’s massive global growth potential as a cornerstone in the economically viable shift to green energy systems,” explained Samuel Leupold, executive vice president and Chief Executive Officer Wind Power at DONG Energy. “Cheaper clean energy will benefit governments and consumers — and not least help meet the Paris COP21 targets to fight climate change. Still it’s important to note that the zero bid is enabled by a number of circumstances in this auction. Most notably, the realisation window is extended to 2024. This allows developers to apply the next-generation turbine technology, which will support a major step down in costs. Also, the bid reflects the fact that grid connection is not included.”
Dirk Güsewell, the manager responsible for the expansion of renewable energies at EnBW, added: “The assumptions regarding electricity prices that were used as the basis for our bid were thus set at a moderate level. The anticipated returns are considerably above our capital costs and thus remain attractive. We have set a clear signal for the direction in which offshore technology is headed with our successful bid. Offshore wind farms are power plants at sea that can be refinanced in future on the electricity market. Thus even without funding and additional economic costs, they can also make an important contribution to the Energiewende and the security of supply in an energy system based on renewable energies. The results of the auction are the best advertising for this concept.”
Bidding has become increasingly more competitive in the European offshore wind sector in the past year. More countries are using wind energy auctions to get the lowest price for future energy.
Source: Industrial Info Resources – 20 April 2017