AMSTERDAM – The Netherlands launched an attempt to fund an offshore wind farm without subsidies on Friday, hoping to capitalize on a boom in renewable energy.
In the world’s first ever so-called ‘zero subsidy’ tender for wind power, only companies that require no support at all can participate.
The Dutch tender follows strong demand at wind farm auctions in Germany earlier this year – where some slots were granted without subsidies – although a Dutch official acknowledged that the Netherlands’ move was testing new ground and it might not receive any bids at all.
Companies can hand in bids for two slots available in the North Sea, each representing a 350 megawatt (MW) project, by Dec. 21. The tender is the third in a series of five Dutch tenders to build offshore wind farms in the next six years with a total capacity of 3500 MW.
At the Netherlands’ two previous auctions for offshore wind power last year, subsidies granted fell by a quarter, as a combination of surging demand for wind energy, low interest rates, technological progress and competition among turbine makers made it considerably cheaper to build wind farms.
Germany, meanwhile, approved 1,490 megawatts (MW) of offshore wind capacity on the German North Sea in April at costs well below expectations, with some bids receiving no subsidies at all.
The German success at limiting subsidies, prompted the Dutch to go a step further and test the appetite for a zero subsidy tender.
“We are curious to see if there will be credible zero subsidy bids”, the Ministry of Economic Affairs’ energy director Sandor Gaastra told a recent conference in Amsterdam. “It is possible that we don’t get bids at all. The market has to calculate the risk.”
Energy companies have tried to lower expectations for the Dutch tender in recent months. Sweden’s Vattenfall [VATN.UL] has called the auction a “big gamble”, although on Friday it said it would participate.
Dutch peer Eneco said it was too soon for bids without subsidies because the costs of offshore wind farms have not fallen far enough yet, although it did not rule out bidding in the tender.
Other companies interested in the project include German energy company EnBW, winner of the subsidy-free tender in Germany. However, it was unclear whether it would take part immediately, or wait for the normal auction, to be held in January if no appropriate zero subsidy bidders emerge.
The absence of subsidies will make it harder to predict revenues, especially as electricity prices remain low. The limited amount of time to complete the project, to be delivered in 2022, also reduces possible cost advantages from new technologies.
“Wind energy will almost certainly be free of subsidies in the long term and there is a sense in the market that zero subsidy bids might already emerge at this tender,” the president of Dutch wind energy association NWEA, Hans Timmers, told Reuters. “But for now, no one can tell.”