The Danish Energy Agency (DEA) has published results from its survey into the lack of bids for the recent 3 GW offshore wind tender in the North Sea. The companies pointed out that, despite generally very good locations in Denmark, with good wind and seabed conditions, they were unable to make a satisfactory business case.
At the beginning of this year, the DEA announced the cancellation of the tender for the Hesselø, Kattegat II, and Kriegers Flak II projects and stated that the government had initiated preparatory work to re-tender up to 3 GW of offshore wind this year.
The DEA conducted a market dialogue with 17 companies to identify the key factors behind their decision not to submit bids for the 3 GW North Sea tender.
The companies pointed out that they were unable to make a satisfactory business case due to a combination of sharply increasing costs (CAPEX, OPEX, and financing costs) and the prospect of low and uncertain earnings opportunities in the Danish electricity market due to expected low electricity prices, a lack of sales opportunities, and market uncertainties related to the electricity and hydrogen markets.
Regarding revenues, companies mentioned a lack of demand and, therefore, a likelihood of low electricity prices. Many point out that positive expectations that the hydrogen market would develop and purchase larger amounts of power from renewable energy have not materialised.
To improve the business case, the companies emphasized the need for support through two-sided Contracts for Difference (CfD). They also highlighted the importance of regular procurements, such as 1-2 GW per year over an extended period, to help the demand side keep pace and support supply chain development.