Denmark’s 3GW Offshore Wind Auction Fails to Attract Bids Due to Rising Supply Chain Costs

Credit:Kim Hansen

Denmark's failure to secure any bids for its 3GW wind auction in the North Sea has been attributed to higher supply chain costs, as countries around the world work to meet ambitious renewable energy targets ahead of 2030.

The Danish Energy Agency (DEA), which oversaw the auction, released a report today detailing the reasons behind the lack of interest. The agency had engaged with 17 companies, including developers and subcontractors, to understand why they did not submit bids for the tender. Despite being positive about the North Sea locations due to favorable wind and seabed conditions, the companies said they were unable to make a “satisfactory business case” due to rising costs.

The report outlined that companies faced sharply increasing capital, operational, and financing costs, with many initially optimistic about the auction. However, as inflation-driven cost hikes and supply chain pressures intensified, the companies' expectations deteriorated as the bid deadline approached.

A significant factor was the impact of rising supply chain costs, which were exacerbated by the global race to meet 2030 renewable energy targets. The companies cited difficulties and higher expenses in securing agreements with suppliers, particularly for wind turbines, cables, and ships. This was partly driven by the demand from multiple countries aiming for 2030 renewable energy goals.

Additionally, concerns about uncertain earnings opportunities in the Danish electricity market also weighed on potential bidders. Despite expectations that a hydrogen market would emerge to purchase larger amounts of renewable energy, this market has not materialized, leading developers to rely primarily on supplying power to the Danish grid. However, with a high share of renewable energy already present on the grid, including , the increased competition has put downward pressure on prices.

When asked what could improve the business case, a majority of companies pointed to the need for support through a two-sided Contract for Difference (CfD), which would help mitigate future uncertainty in the electricity market and ensure sufficient competition in potential future procurement rounds.

Add a comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Keep Up to Date with the Most Important News

By pressing the Subscribe button, you confirm that you have read and are agreeing to our Privacy Policy and Terms of Use