Zero-support bids from 2018 could make bidders pay in German offshore auctions

The successful zero-support bids submitted in offshore wind power auctions in Germany in 2018 could come back to haunt bidders when new auctions start in 2021, Steven Hanke writes for energy policy newsletter Tagesspiegel Background. Bidders could be forced to pay for their own installations because the lowest bid offered two years ago determines the highest permitted support in the new auctions. New bidders now have to directly offer projects without support in the upcoming round of auctions, but this will cause difficulties when deciding which projects will be awarded, Hanke writes. If picking a winner by drawing lots is to be avoided, lawmakers need to find other ways to differentiate between numerous bids offering to build offshore wind farms with a guaranteed remuneration of 0 cents per kilowatt hour. The "preferred" model in Germany's economy ministry (BMWi) would be an additional offer by bidders to pay an annual lease for their wind farm, meaning they are effectively charged rather than receiving support for operating their installation. "The higher these payments are, the higher their chance to prevail," Hanke writes.

German offshore wind power industry association BWO has rejected the idea of charging bidders, which has already been implemented at auctions in the Netherlands, arguing that this would lead to higher power costs and reduce the chances that awarded projects are implemented at all. The BWO instead proposes so-called Contracts for Difference as a possible remuneration model, which are based on actual power generation costs rather than on expected costs, he writes. 

Germany plans to expand offshore capacity to 20 gigawatts (GW) by 2030, from about 7.5 GW from nearly 1,500 offshore turbines in 2019 which contributed about four percent to Germany's gross power consumption. In December last year, Danish offshore wind company Orsted and German chemical maker Covestro signed the world's biggest power purchase agreement (PPA) for an offshore wind farm planned without support payments in the North Sea.