Europe achieved its lowest-ever bid for an offshore wind power project last week in a German auction in the North and Baltic Seas, an event that backs up a recent trend of cost reductions. Germany’s first so-called “reverse auction” for offshore wind shifts away from a feed-in tariff schemes in an approach intended to drive down costs. The German auction fetched an average bid of €44 per megawatt hour and one bid of zero euros, following a general trend of lower prices in similar auctions in Denmark and the Netherlands. In Germany, the bids are on top of the wholesale power price. As a result, a bid of zero euros will receive only the wholesale power price. In Denmark and the Netherlands, bids are an all-in amount, which comprises the wholesale power price, plus a “sliding tariff” that tops up the difference to the bid amount. In all three countries, successful bidders will receive a free onshore and offshore grid connection and connecting sub-sea cable. So as a result, a bid of zero euros, as in Germany last week, is not exactly unsubsidised. That said, it’s good to keep in mind that offshore wind projects take a while to build: last week’s German auction was for projects to be completed by 2025 at the latest. The auction revealed the cost of offshore wind not today, but in up to eight years’ time, assuming the project is completed. Notwithstanding these caveats, costs for offshore wind appear to be falling.
Renew Economy 19th April 2017 read more »