Germany has failed to secure any bidders for the offshore wind project that was due to start operations soon. The German government announced that no bids were submitted for the offshore wind project, which features no subsidies from the government. Which some state may be the source of the problem. Energy companies in Europe have seen a shift from bidding for projects without the vital subsidies that the government provides to a more profit-focused approach to the energy sector overall.
The auction saw not one single bid being made for the offshore wind project in Germany
And it is the second auction this year to see zero bids for an auction being held by the German authority. The auction took place in August, and not a single bid was submitted, leading to crisis claims coming from the wind sector in Germany. The overarching conclusion resulting from the failed bidding process has led many in Germany to suggest the government needs to revise the auction process, and perhaps offer subsidies to attract potential operators.
It is the second auction this year in Germany that features a “no-subsidy” status, which could be the root of the issue. Both auctions failed to receive a single bid, and the lack of interest points to offshore wind power developers being wary of projects that offer zero subsidies from the government, opting instead for the reliable financial returns that the oil and gas sector provides.
The German Offshore Wind Energy Association raised its concerns over the lack of bidders
The German Offshore Wind Energy Association (BWO) stated its concern for the situation in Germany, which is deteriorating beyond what was thought possible thanks to the failed auction.
“The current auction design forces developers to bear risks beyond their control without any protection. The result sends a clear message: The German offshore wind market is currently not attractive to investors. The federal government is thus missing the opportunity for significant value creation and employment in Germany and Europe.” – BWO’s managing director Stefan Thimm
Germans call for the government to revise the contract for difference system
One way to circumvent the worries and concerns of the potential operators for the wind projects in Germany is for the government to revise the current contract for difference system. The CFD system aims to guarantee a fixed price for electricity over a set period, regardless of fluctuating market prices. That guarantee could persuade potential interested parties to take on the sizable risks that operating a wind farm presents.
“The federal government must finally pave the way for a reliable CfD [contract for difference] system alongside long-term electricity supply contracts. Contracts for Difference lead to a reduction in electricity generation costs of up to 30 percent – the basis for competitive electricity prices. Without this reform, further auctions could fail – and with them the energy transition.” – BWO’s managing director Stefan Thimm
The issues for the wind sector in Germany are a relatively new problem, as the sector shifts from its previous stance of operating these sites with little to no government backing. Germany recently greenlit a new project seen as the “mother of all wind farms”.
Will the German government head the call to revise the contract for difference mechanism
As both auctions this year saw zero bids from the sector, we expect the German government to shift its focus and revise the current contract for difference mechanism. The wind power sector has seen unbelievable developments thanks to the innovation taking place worldwide, and if Germany does nothing, it will fall behind the sector’s progress in delivering safe and efficient power to its citizens. Wind power represents the best and most practical form of transitioning away from the good ol’ oil and gas industry.
