![]() The German government will spend 90% of the revenue to fund the grid connection costs, 5% to protect maritime biodiversity, and the remaining 5% to support sustainable fishing. As the total costs of developing offshore wind projects excluding licensing costs are EUR 2bn to EUR 2.5bn per GW, this implies that the entry fees increase investment costs by about 60 percent. When taking into account a 3.24 percent discount rate (equal to the 10-year eurozone SWAP-rate at the moment of writing), the net present value amounts to EUR 1.35bn per GW and is thus – due to the long time horizon – substantially lower than the nominal bid. In this new set-up, auction winners have to pay 10 percent of the bid upfront, whereas the remaining 90 percent will be paid during the 20-year exploitation period, starting in 2028. ![]() This meant developers entered a second round of uncapped bidding and the tenders were awarded based on a ‘price only’ basis. This prompted an additional “dynamic bidding procedure” in which developers pay for the right to develop the project. The sites are not pre-developed by the government and the companies pledged to develop the wind farms without any state support. In July 2023, German tenders for offshore wind parks were awarded to newly-created subsidiaries of BP and TotalEnergies, who bid close to EUR 2bn per GW of installed capacity. awarding points for performance on these aspects) could be a more effective and efficient way to reach these goals than capping price competition. Incorporating these aspects directly into the evaluation process (e.g. We conclude that a number of qualitative aspects of tenders deserve more attention in auction design, for example the safeguards that ensure a timely construction of wind parks, innovation, and strategic autonomy in the offshore wind supply chain. This article discusses potential consequences of high-capped or uncapped auctions (referred to as ‘negative bidding’ in some recent publications), as well as various other design aspects of tenders for offshore wind parks. Pressure to reduce costs could cause project cancelations and delays that could have negative effects on new investments in the entire (already financially challenged) offshore wind supply chain, in turn increasing the risk of (part of) the supply chain moving out of Europe. ![]() The high entry fees put already planned and awarded offshore wind projects at risk of not being built and jeopardize achieving offshore wind energy and climate change targets. The costs of high bidding, as well as cancellations and delays, could reduce profitability within the wind energy industry and give offshore wind an image of being unprofitable and unreliable, thereby potentially reducing the appetite for future investment. The high entry fees might be passed on to society by means of higher energy prices for consumers. Uncapped or high-capped bidding (related to the seabed leasing fees/entry fees) could crowd-out some wind energy developers, in particular those that do not have large cash flows from a fossil fuel business that could subsidise offshore wind development.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |