Bidders could end up paying production fee in Germany’s largest-ever offshore wind auction

With its largest offshore wind power auction to date, Germany aims to make progress on its ambitious target to nearly quadruple capacity by the end of the decade – and could introduce a scheme that makes turbine operators pay for their right to produce electricity. A total of 7 gigawatts (GW) will be auctioned in 2023, the Federal Network Agency (BNetzA) announced. The capacity is by far the largest ever auctioned and almost matches the country’s existing offshore wind capacity of 8 GW. “These auctions are an important step for reaching the offshore expansion target of 30 GW by 2030,” BNetzA head Klaus Müller said. The auctioned capacity is slated to go into operation by 2030 and partitioned into three wind farms with a capacity of 2 GW in the North Sea and another 1 GW in the Baltic Sea. The grid agency said it is possible that several zero-support bids could be submitted this year, meaning that bidders are ready to build their turbines without demanding guaranteed payment for their output. Should this be the case, a so-called dynamic bidding procedure could be introduced for the first time, meaning the BNetzA would auction off construction sites to those offering to pay the highest fee. “Ninety percent of proceeds from the dynamic bidding procedure would go into lowering electricity prices, five percent into marine environment protection and five percent into sustainable fishing,” the agency said. Bids will have to be submitted by June this year, with some of the auctioned areas still requiring environmental assessments which will need to be conducted by the bidders.

Offshore wind energy has seen substantial price drops in previous years, making it one of the most reliable and profitable renewable power sources available. Germany plans to greatly increase its capacity in a bid to reach its ambitious renewable power share target of 80 percent by the end of the decade. However, expansion in 2022 reached merely 0.3 GW. The government is also mulling the use of offshore wind as a means to permanently lower electricity prices for industrial companies, who could be entering into bilateral contracts for difference (CfDs) with operators to receive power at fixed rates backed by state support.