Germany to tender five North Sea wind concessions this summer, 8 GW on offer

Germany is to tender five North Sea wind concessions this summer with a total 8 GW on offer in two auctions.

The first tender with a June 1 deadline for two sites with a combined 2.5 GW far offshore may see another round of uncapped dynamic bidding to decide the winner in case of multiple zero bids.

"The government preferred to leave the current system in place at least for the 2024 auctions, to gain more experience and likely also because it is not unhappy with the unexpectedly large payment amounts going to the state from last year's record auction," said Christine Bader, offshore wind expert at law firm Watson Farley & Williams in Hamburg.

Last June, this auction model for not pre-assessed sites saw BP and TotalEnergies bid Eur12.6 billion ($13.7 billion) for the rights to build offshore wind projects with 7 GW capacity.

The new sites (N-12.3 and N-11.2) some 120 km northwest of Heligoland are adjacent to concessions awarded to BP last summer.

The projects come with a grid link planned for 2031.

Regulator BNetzA has made some adjustments to the negative bidding phase with bidding rounds faster, and in the envisaged scenario of parallel auctions for both relevant sites, all remaining bidders will receive information for both sites, namely the number of remaining bidders for each site and the bidding level for the next round, Bader said.

Bigger tender in August

The second tender with an Aug. 1 deadline for pre-assessed sites (central model) could be the "big ticket item" this summer with 5.5 GW on offer across three sites in the N-9 zone.

One 1.5-GW project comes with a 2029 grid connection, while the two 2-GW concessions have slipped into 2030 and 2031.

Bids under this model were significantly lower in 2023 as non-monetary criteria are included in a points system.

"We may expect to see real competition under this auction type for the first time," said Bader explaining that, unlike last year, there are no step-in rights for previous developers this year while the sites are much bigger.

The financial bid in this auction accounts only for a maximum 60 out of a total 95 points with non-monetary criteria from the share of renewables in the production of the wind park, share of trainees and noise reduction during foundation installation or the availability of a PPA.

Cost hikes

Overall, the actual wind farms for the concessions tendered this summer may require an investment of around $20 billion assuming similar costs to the final investment decision for the 900 MW He Dreiht by EnBW in 2023.

EnBW management on May 16 said Germany's power price level was back in line with EnBW's assumptions for the coming decades when it bid for the project in 2017, while costs had risen significantly since.

Analysts at S&P Global Commodity Insights forecast further slight cost increases towards the end of the 2020s pegging 2030 costs around $2.9 billion/GW.

"Developers are expected to pursue cost optimization through economies of scale and procurement optimizations as they group projects into large commercial offshore wind clusters," said Andrei Utkin, offshore wind analyst at Commodity Insights.

"Tight supply chains for equipment and installation vessels, along with higher financing costs compared to pre-pandemic levels, may present challenges in achieving substantial cost reductions towards the end of the decade," the analyst added.

Germany's installed offshore wind capacity is to reach 10 GW next year. Beyond 2025, this summer's auctions will lift tendered projects to almost 20 GW with another 2.5 GW to be tendered in 2025.

However, Germany is unlikely to reach its 30 GW by 2030 target due to slight delays in connecting projects to the grid.

Commodity Insights analysts forecast some 20 GW online by 2030.

German offshore wind capture prices averaged Eur86/MWh in 2023, but are set to fall further in 2024, according to Platts assessments for Commodity Insights.

GERMAN OFFSHORE WIND: 2024 TENDERS

Source: BSH, BNetzA