The Dutch government is worried this year’s 4GW IJmuiden Ver Gamma and Nederwiek 1 offshore wind tender will be a high-profile flop. Last month, the Dutch parliament passed a motion to change the tender process to improve confidence for both developers and off-takers.
Is the Netherlands about to follow Denmark’s unenviable example of a failed offshore wind tender? That fear is driving a flurry of activity in the Dutch government.
Dutch utility Eneco said it will not bid in the country’s 4GW IJmuiden Ver Gamma and Nederwiek 1 offshore tender, which is set to open in September 2025.
The company also refused to bid in the 4GW IJmuiden Ver Alpha and Beta tender last year due to its concerns over rising costs, uncertain power prices and the ‘zero subsidy’ structure. Eneco’s planned partner in that tender, Equinor, also opted out.
In the end, these two high-profile refusers did not cause the tender’s downfall. The two winners were a consortium of SSE Renewables, ABP and APG for the 2GW Noordzeker on the Alpha site; and a joint venture between Vattenfall and Copenhagen Infrastructure Partners for the 2GW Zeevonk II on the Beta site.
It is not just Eneco turning away from the 2025 tender. Ørsted also said it isn’t going to bid, and the government is getting the message. It said it has “major concerns” about whether there will be enough bids in this year’s tender and is acting before it’s too late.
On 20th March, the Dutch House of Representatives adopted a motion, called ‘Cabinet Approach to Climate Policy’, that commits Deputy Prime Minister Sophie Hermans to publish an ‘action plan’ for how to reduce bidder’s financial risks in the tender. It wants to avoid the types of failures seen in other European countries in the last two years.
For example, in December, the Danish government failed to secure any bids in its 3GW tender for three sites in the North Sea. The failure was expected and the Danish Energy Agency published its post mortem in February. It attributed the lack of bids to a mixture of sharply rising costs, higher risk premiums, and fewer potential revenue sources in the Danish market. Policymakers are now looking to launch Contracts for Difference (CfD), which have worked well to grow offshore wind in countries including the UK.
The UK faced its own failure in September 2023, but for slightly different reasons. In the nation’s CfD allocation round five, there were no offshore wind bids because developers said the proposed price cap was too low due to rising costs and supply chain problems. It responded by raising the price cap and, last September, it successfully gave support for nine fixed-bottom and floating wind projects totalling 5.3GW in allocation round six.
The Dutch government now wants to avoid becoming a casualty in 2025.
Policy considerations
The motion in the House of Representatives commits the government to a few major changes that would take effect from the IJmuiden Ver Gamma and Nederwiek 1 tender.
The first is a shift away from ‘zero subsidy’ bidding and towards CfDs, which helps developers to stabilise their revenues and thus gives them greater certainty. This is a quick win that would give developers a system that many already use successfully.
The second proposal is for the government to use a power purchase agreement (PPA) guarantee fund from 2027. This would help de-risk commercial PPAs between offshore wind developers and energy off-takers, by providing a safety net for developers in the case of off-taker defaults and thus giving them the confidence to sign deals. This would also help off-takers cope with fluctuating power price and their changing energy needs.
And third, the government is looking at whether it can bring a planned 2027 tender a year earlier, to speed up the rollout of Dutch offshore wind. The Netherlands has a goal of 21GW offshore wind by 2032 and 50GW by 2040, up from 11.7GW now.
Other ideas have come from trade association NedZero, which has called for greater collaboration between countries in the North Sea to unlock cross-border PPAs; and to give developers unfettered access to the power market. However, it counselled against a proposal by energy regulator ACM that would bring in feed-in tariffs where large power producers pay to send electricity to the grid to fund network upgrades. This idea is only set to add costs for developers and make it more expensive to building offshore wind.
These proposals should give confidence to both the energy producers and users. They show the Dutch government is serious about making changes, and it considering needs of both energy producers and buyers.
Hermans is due to unveil full details of her proposals this month. This will give us a good idea of whether the IJmuiden Ver Gamma and Nederwiek 1 tender will be a flop – or whether it can be fixed.
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