German Wind Project Approved Without Subsidy

Dong turbine

By MarEx 2017-04-13 19:04:19

Germany approved 1,490 megawatts (MW) of offshore wind capacity on the German North Sea on Thursday, including projects by Dong Energy that don’t require a subsidy.

Dong Energy received approval for three of six offshore wind projects submitted: 
• OWP West (240MW)
• Borkum Riffgrund West 2 (240MW)
• Gode Wind 3 (110MW)

The three projects are planned to be commissioned in 2024, subject to Final Investment Decision by Dong Energy in 2021.

For two of the projects – OWP West and Borkum Riffgrund West 2 – Dong Energy made bids at zero EUR per MWh, i.e. these projects will not receive a subsidy on top of the wholesale electricity price. The Gode Wind 3 project was awarded based on a bid price of EUR 60 per MWh.

Samuel Leupold, Executive Vice President and CEO of Wind Power at Dong Energy, says: “The zero subsidy bid is a breakthrough for the cost competitiveness of offshore wind, and it demonstrates the technology's massive global growth potential as a cornerstone in the economically viable shift to green energy systems. 

“Cheaper clean energy will benefit governments and consumers – and not least help meet the Paris COP21 targets to fight climate change. Still it’s important to note that the zero bid is enabled by a number of circumstances in this auction. Most notably, the realization window is extended to 2024. This allows developers to apply the next generation turbine technology, which will support a major step down in costs. Also, the bid reflects the fact that grid connection is not included.”

Cost-drivers enabling the zero subsidy bid are:

Platform change: Significantly bigger turbines – probably 13-15MW – will be on the market by 2024. With bigger turbines, the developer can increase electricity production while at the same time reduce the number of turbine positions. This contributes significantly to cost reductions during construction (fewer towers and array cables, and lower costs for installation vessels and manpower) as well as during a lifetime of operations and maintenance.

Scale: OWP West and Borkum Riffgrund West 2 will be combined into one large-scale project with the option of adding additional volume in next year’s auction to further increase the total size of the project.

Location: The projects benefit from average wind speeds of more than 10 m/s, which is among the highest wind speeds measured across Dong Energy’s portfolio of wind farms. Also, the projects are located next to Dong Energy’s Borkum Riffgrund 1&2 which means that operations and maintenance can be done from Dong Energy’s existing O&M hub in Norddeich.

Extended lifetime: The German authorities have approved the possibility to extend the operational lifetime of the asset from 25 to 30 years.

Not full scope: Developers were not bidding for the grid connection in the German auction, which means that grid connection is not included in the bid price.

Dong Energy will be responsible for the turbines, array cables and offshore substation, while grid operator TenneT will be responsible for construction, operation and ownership of the onshore substation and the export cable.

Dong Energy currently has 902MW of offshore wind in operation in German waters with Gode Wind 1&2 and Borkum Riffgrund 1 and another 450MW under construction at Borkum Riffgrund 2, which is expected to be commissioned in 2019. In total, the company operates 3,600MW offshore wind capacity across Germany, the U.K. and Denmark and has a further 3,800GW under construction.

The German regulator Bundesnetzagentur approved offshore wind farm developments for both Dong Energy and Germany’s EnBW. The projects, due to be implemented beyond 2020, were cleared at an average price requiring a subsidy of 0.44 EUR cent per kWh of power. EnBW received approval for a 900-MW site called He Dreiht, which ties in with two other wind farms in close vicinity.

Under current tariffs, operators of offshore wind receive a subsidy of 12 cents/kWh, reports Reuters. The power price paid by end-users is around 30 cents/kWh, among the highest in Europe.

The authority will put to auction approval for a further 1,610 MW in a second round next year.

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