German Offshore Wind Auction Fails to Attract Bids, Highlighting Flaws in Negative Bidding Model
Key Insights
Germany's recent 2.5 GW offshore wind auction for two North Sea sites concluded without any bids, signaling significant investor disinterest.
The German Offshore Wind Energy Association attributes the failure to an unappealing auction design burdening developers with excessive, uncontrolled risks.
BWO Managing Director Stefan Thimm advocates for a fundamental overhaul, including the introduction of Contracts for Difference to reduce electricity generation costs.
The Federal Network Agency plans a new tender for the same sites, N-10.1 and N-10.2, originally slated for operation in 2030 and 2031.
Germany's ambitious offshore wind expansion faced a significant setback as its latest 2.5 GW tender, covering two strategically important North Sea sites (N-10.1 and N-10.2), closed on August 1 without attracting a single bid. This unprecedented failure has prompted immediate and strong calls from the German Offshore Wind Energy Association (BWO) for a comprehensive overhaul of the nation's offshore wind auction framework, highlighting critical market disincentives.
Stefan Thimm, Managing Director of BWO, articulated the industry's long-standing warnings against imposing excessive, uncontrollable risks on developers. He emphasized that the current legal requirements fail to adequately accommodate the necessary investment framework for German offshore wind projects, rendering the market unattractive to investors. This situation, Thimm asserted, jeopardizes significant opportunities for value creation and job growth within Germany and across Europe.
Thimm underscored the industry's readiness to invest over €200 billion in offshore wind by 2045, contingent on a supportive and predictable regulatory environment. He specifically urged the federal government to implement Contracts for Difference (CfD) alongside long-term Power Purchase Agreements (PPAs). According to Thimm, CfDs could reduce electricity generation costs by up to 30%, fostering competitive electricity prices and preventing future auction failures that are crucial for the broader energy transition.
The 2.5 GW capacity, sufficient to power nearly all households in Cologne, was originally intended for commissioning in 2030 and 2031. The collapse of this tender stands in sharp contrast to the successful June auction where TotalEnergies secured the 1 GW N-9.4 North Sea site. Following the zero-bid outcome, the Federal Network Agency has confirmed its plans to conduct a new tender process for the same unawarded sites, underscoring the urgency to address the underlying issues. This development raises significant concerns about Germany's ability to meet its ambitious renewable energy targets and maintain its leadership in the European offshore wind sector without substantial policy adjustments. It also highlights a broader trend of developers seeking more stable and predictable regulatory environments for large-scale, capital-intensive projects.