The largest offshore wind tender in Danish history ended in December 2024 with the worst possible scenario, and this was due to uncertain revenues and a lack of flexibility in costs, according to a new report. According to a press release from the Danish Energy Agency, the consultancy Boston Consulting Group is behind the report on the missing bids, in which the conclusion is clear.
- The uncertainty on the revenue side, combined with a lack of flexibility on the cost side, resulted in the Danish offshore wind areas in the North Sea being assessed as unprofitable and risky investments, the conclusion is.
Three out of a total of six gigawatts of offshore wind were put out to tender, but not a single bid was received in December 2024. The three gigawatts were distributed across three offshore wind farms in the North Sea. The government has since lowered Denmark's climate ambitions considerably.
Where the goal so far was to build up to nine gigawatts of offshore wind by 2030, the goal is now to get two to three gigawatts of offshore wind up in the same year. When the tender was launched, offshore wind was good business. But since then, rising commodity prices and higher interest rates have made it more expensive to build wind farms.
The six gigawatts were to be offered without support, and the energy companies were to pay the state to produce the wind energy. It was also decided that the state would own 20 percent of the farms. Before the tender expired, the industry had aired its concerns about whether the conditions in the market were in line with the conditions of the Danish tender.
According to the consultancy, the conditions for the tender were not in themselves decisive. But combined with a number of other uncertainties, the decisive factor was that no players bid.
- Several of the tender conditions have worsened the business case by both adding additional costs and risk and increasing the developers' exposure to market conditions, writes the consultancy.
One of the major problems, which the industry itself also pointed out, was the sale of the electricity. Shortly before the failed tender, a large hydrogen pipeline was postponed for several years. This thus hampered the business model behind several of the offshore wind farms, which were supposed to supply electricity to produce the green hydrogen. The government has since lowered its ambitions and will initially settle for building a hydrogen pipeline from Esbjerg to Germany, which has several energy-intensive industries.
It is noted that the developers had many other investment alternatives within offshore wind in other markets and other energy sources.
- The Danish offshore wind areas in the North Sea were therefore seen as relatively risky in terms of return, writes the consultancy.
jel /ritzau/
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