WIND

4 talking points from European offshore wind tenders in Q2 2024

Developers have made viable projects their goal in offshore wind tenders in 2024, but the result is low bidder numbers and the end of at least one development tie-up. We look at four talking points from four offshore wind tenders that concluded in Europe in the second quarter of 2024.

RICHARD HEAP

June 24, 2024

  • Countries including France and Germany concluded offshore tenders in Q2
  • Low bidder numbers and one ended tie-up show viability is a major concern
  • However, developers remain innovative as non-price criteria gain popularity

 

It’s half-time in 2024. If the European Championship has taught me anything, it’s now time to sit around a big table and moan about why Gareth Southgate is so awful.

But thankfully, it isn’t my job to complain about why the England team won’t win with Southgate in charge, not that the men’s team has won anything of note since 1966. Instead, I’ll focus my punditry on the results of the largest offshore wind tenders that have concluded in Europe in the last quarter. This has included famous victories, low benchmarks, and development partnerships that fell apart like England’s midfield.

In a year of high-profile offshore wind tenders in Europe, it is worth reflecting on the big lessons so far. Here are four of the biggest talking points:

 

1) Viability concerns can rupture offshore partnerships

On Friday 21st June, TotalEnergies won the right to develop a 2.5GW offshore wind project in the N-11.2 site in the German North Sea paying total fees of around €2bn; while EnBW won the rights to develop a 1.1GW project on the N-12.3 site with fees of around €1.1bn. Germany launched the tender for the two sites in January 2024.

However, the big talking point concerned German utility RWE, which was bidding in the tender in a special purpose vehicle called Offshore Wind One with TotalEnergies but pulled out at short notice. RWE said the bid did not meet its criteria for economic viability and added that TotalEnergies would pursue the project on its own.

It isn’t unusual for joint venture partners to go their separate ways, but we can’t recall an instance where a development partner walked away so late in the process. This is an example of why viability is a major concern for developers and that firms continue to take a hard line on projects that don’t meet their profitability targets.

The fact TotalEnergies can continue developing on its own also reminds us that large oil and gas companies enjoy a competitive edge, because they can afford to invest in expensive site leases without their joint venture partners.

 

2) Auctions can conclude successfully with only one bidder

In April, Lithuania’s National Energy Regulatory Council delayed a second tender for a 700MW offshore wind farm in the Baltic Sea after it only gained one bidder. It said it would not concluded the process with fewer than two bidders. However, we saw in Estonia last week that some countries will conclude auctions with only one bidder.

On 21st June, Norwegian firm Deep Wind Offshore won the rights to build a 1.5GW offshore wind farm on the Saare 2.1 site in the Estonian Baltic Sea despite being the sole bidder. It won the rights at just under €2.5m despite being the sole bidder. Two other parties declined to bid despite previously expressing an interest: Utilitas Wind; and a consortium of Copenhagen Infrastructure Partners and Ignitis Group.

This suggests some countries new to the offshore wind sector are keen to accelerate the growth of offshore wind in their waters even if the process isn’t as competitive as they might like, and don’t simply want to maximise returns. The auction for Estonia’s 487MW Saare 2 site is under way and is due to finish tomorrow (28th June); and the 110MW Saare 3 site is due to be auctioned next week (2nd to 4th July).

 

3) Non-price criteria bolstered innovation in 4GW Dutch tender

On 11th June, the Netherlands Enterprise Agency closed the largest offshore wind tender in Europe in the second quarter of 2024, by awarding support to developers of two projects totalling 4GW.

A consortium of SSE Renewables and pension funds ABP and APG won the rights to build the 2GW Noordzeker project on the IJmuiden Ver Alpha site; and Copenhagen Infrastructure Partners and Vattenfall won the rights to develop the 2GW Zeevonk II project on the IJmuiden Ver Beta site, including 50MW of floating solar and linked to a green hydrogen facility in the Port of Rotterdam with 1GW electrolyser capacity.

Despite the big-name winners, bidding in this tender was sluggish: the agency said there were just two bidders for each 2GW area. However, the process also showed its focus on non-price criteria, by picking the winner based on which companies won the most points by meeting a number of criteria, including how they connected with the Dutch grid and how they strengthened protection for nature. This helped to open opportunities for developers to include new technologies including floating solar and green hydrogen, and could help to strengthen the commercial cases for each.

 

4) Industry warned about using France as floating benchmark

On 15th May, the French government published the results for its first commercial-scale floating offshore wind tender. The tender for the 250MW A05 site off the coast of South Brittany attracted six bidders out of the ten pre-qualified consortia; and the winner was a group made up of BayWa and Elicio at a price of €86/MWh.

This result is positive for floating offshore wind, as it shows strong interest despite the commercial and technical challenges inherent working with a new technology. This shows the appeal for developers of gaining an early foothold in this market.

But WindEurope has also warned other governments that this price should not be seen as a benchmark for floating wind as the conditions would not be replicated on other sites: the site has strong winds and less challenging depths than many other sites; the Contract for Difference is linked to inflation so takes into account potential rising costs; and French transmission operator RTE will pay for the grid connection.

In addition, it called for changes to the non-price criteria on which France is judging projects, including an emphasis on projects that use fewer turbines as that pushes developers to design projects using larger machines that are not yet commercially available; and giving insufficient weight to its ‘robustness criteria’, which is intended to weed out bidders that cannot deliver.

Viability is essential for those working with new and established technologies alike.