The risks of zero-subsidy offshore wind

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The energy world was stunned in April when 1.38GW of German offshore wind was won at tender with zero-subsidy bids, meaning that the three projects will rely solely on the wholesale electricity price when commissioned in 2024-25.

The two winning utilities, Denmark’s Dong Energy and Germany’s EnBW, have not revealed their cost projections, but analysts have calculated that the projects’ levelised cost of energy (LCoE) is likely to be around €31 ($33.70) per MWh.

The news has led some to proclaim that the bids are a game-changer for the industry and will lead to a global boom in offshore wind around the world.

But the circumstances of the projects — EnBW’s 900MW He Dreith and Dong’s OWP West and Borkum Riffgrund West (both 240MW) — are relatively unique and not necessarily transferable.

Plus, the utilities have based their plans on assumptions about the future prices of electricity and carbon — as well as the future size of offshore turbines — that could prove to be wide of the mark. It is also worth remembering that it will be several years before Dong and EnBW take a final investment decision, and the penalties for abandoning the schemes are relatively small.

So what are the chances that the zero-subsidy projects will actually go ahead as planned — and be profitable?

Extreme-scale turbines

According to both Dong and EnBW, one of the reasons they could offer such low bids is that offshore turbines will have much larger nameplates by 2024-25, generating far more bang for the buck.

“If the volume [of an offshore array] is capped, in our case at 900MW, then a larger turbine decides how many locations you really need to build,” says Dirk Güsewell, the head of portfolio development at EnBW.

“And the fewer locations there are, the fewer foundations, towers and nacelles are needed.”

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