WindEurope: ‘European Governments Should Not Follow German Example of Negative Bidding’

July 13, 2023, by Adrijana Buljan

Following the results of the latest German offshore wind auction, which went into the so-called negative bidding stage and ended up earning the State billions from the winning developers, WindEurope warned that this would be passed on to consumers and the supply chain, and called on the German government to avoid this approach in future auctions.

As reported yesterday, 12 July, BP and TotalEnergies secured development rights for four sites by offering a total of EUR 12.6 billion in bids in the “dynamic bidding” round of the auction. This round, through which the developers competed only in financial bids, took place after each of the four sites had more than one developer proposing to build a wind farm without subsidies.

In the 7 GW offshore wind auction, Germany’s biggest to date, BP won rights for two 2 GW sites in the North Sea and Total Energies for one 2 GW site in the North Sea and the 1 GW site that was offered in the Baltic Sea.

The four offshore wind farms are scheduled for commissioning by 2030.

Of the total of EUR 12.6 billion BP and TotalEnergies will have to pay to the German government, 90 per cent will go towards funding the grid connection costs, 5 per cent will be used to protect maritime biodiversity, and another 5 per cent to support environmentally-friendly fishing.

However, WindEurope pointed out that all these investments will be ultimately passed on to electricity consumers and the offshore wind supply chain which will have to work with even tighter margins.

“Negative bidding creates additional costs for offshore wind developers. These costs must be passed on. Either to the supply chain which is already struggling with inflation and surging input costs. Or to the consumers who already face higher electricity prices and costs of living”, the European wind industry association said.

WindEurope also noted that, in terms of energy security and renewable energy goals the EU needs as much new wind energy capacity as it can get sooner rather than later, and that investments in securing seabed areas such as this are drawing developers’ funds away from investing into further projects.

“All the money paid in negative bidding is money our companies cannot invest in other wind energy projects. European Governments should therefore not follow the German example of negative bidding”, WindEurope stated.

Germany is currently running another offshore wind auction, for 1.8 GW of offshore wind capacity at four centrally pre-examined areas in the North Sea, for which bidders are submitting offers until the 1st of August.

The auction for these sites is based on a statutory point system, with up to 60 points awarded for the bid value, which reflects the bidder’s willingness to pay, and a total of up to 35 points for the so-called qualitative criteria.

The qualitative criteria include the proportion of electricity from renewable energy sources in the production of wind turbines, the proportion of trainees, the use of environmentally friendly foundations, and the scope of long-term electricity supplies to third parties.

In this auction too, 90 per cent of the payments made by the successful bidder(s) will go towards reducing electricity costs, 5 per cent towards marine conservation and another 5 per cent for the promotion of environmentally friendly fishing.