Offshore Industry News

Historically Low Bid for Offshore Wind Farm

The Danish government published the winning bid in the Kriegers Flak tendering procedure on 9 November 2016.

The lowest bid came from Vattenfall Vindkraft A/S, who will establish 600 MW in the Baltic Sea at a tender price of 37.2 øre/kWh. This is an extremely low tender price - a world record for offshore wind turbines. The final decision on the tendering procedure will be clarified once Treaty-compatible financing has been identified under the current Public Service Obligation (PSO) negotiations.

This morning, Danish Minister for Energy, Utilities and Climate, Lars Christian Lilleholt, briefed the parties behind the 2012 Energy Agreement (the Red-Green Alliance, the Socialist People's Party, the Danish Social Democrats, the Danish Social-Liberal Party, the Danish People's Party, the Conservative People's Party of Denmark and the Liberal Party of Denmark) that Vattenfall has submitted the lowest bid to construct the 600 MW Kriegers Flak offshore wind farm at a tender price of 37.2 øre/kWh. The Krieger’s Flak tender attracted extremely fierce bidding, and in addition to Vattenfall, five other companies/consortia have submitted tenders. The other bids will not be made public.

Costs of state aid much lower than expected

The total aid costs to construct Kriegers Flak are expected to amount to DKK 3.5 bn. for the full aid period from 2019-2032. The expected costs of state aid are around 60% less than the expected costs of DKK 8.2 bn. for the full aid period that were forecast when the Energy Agreement was established in 2012, see figure 1 below. In addition there are costs of routing onshore of DKK 3.1 bn.

The result of the tendering round shows that the need for aid has fallen compared with expectations when the Energy Agreement was passed in 2012. Expected electricity prices have fallen significantly, but as the tender price is also lower, it is expected that overall costs of state aid will also be less.

“The price of offshore wind power is plummeting and offshore wind power has become significantly more competitive,” said Lars Christian Lilleholt, Minister for Energy, Utilities and Climate. “The government sees a number of advantages in completing Kriegers Flak. State aid for Kriegers Flak is far below the expected levels in the Energy Agreement, in sharp contrast to nearshore wind turbines for which aid costs have increased significantly. Kriegers Flak will link the Danish and German electricity systems and bolster security of supply of green electricity on Zealand. Kriegers Flak will provide Denmark with more than just an offshore wind farm that can supply over 600,000 households with green electricity, it will also be an important electricity link to other countries which takes an important step towards a more integrated European electricity market to benefit cost-effective, green and secure energy supply. In summary, Kriegers Flak is a showcase for what Denmark can do with green energy.” 

• The final decision regarding the tender will be clarified when Treaty-compatible financing has been found under the PSO negotiations.

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