Germany’s recent offshore wind auction, held on October 25, 2023, failed to attract any bids, raising alarm bells within the renewable energy sector. The Federal Network Agency organized the auction for 10.1 gigawatts (GW) of offshore wind capacity in the North Sea, but no investors submitted proposals for the two designated sites. This outcome has prompted calls for a significant reevaluation of the country’s renewable energy auction framework.
The Federal Association for Offshore Wind Energy (BWO) expressed deep concern regarding the auction’s failure. The association emphasized that developers are hesitant to engage in zero-subsidy projects given the current landscape of rising costs and ongoing supply chain disruptions. BWO views this situation as a critical indicator that the existing auction structure is unworkable.
In a statement, BWO’s managing director Stefan Thimm pointed out the deficiencies in the current auction design. “The current auction design forces developers to bear risks beyond their control without any protection,” Thimm stated. He highlighted that the outcome sends a clear message: “The German offshore wind market is currently not attractive to investors.” Thimm further noted that this failure represents a missed opportunity for substantial economic growth and job creation within Germany and across Europe.
To address these challenges, BWO advocates for a comprehensive redesign of the auction system. Thimm urged the federal government to eliminate bottlenecks in the supply chain, particularly those affecting port expansions and modernization efforts. He stressed the necessity of establishing a reliable Contract for Difference (CfD) system along with long-term electricity supply contracts. According to Thimm, “Contracts for Difference lead to a reduction in electricity generation costs of up to 30 percent – the basis for competitive electricity prices.”
The urgency for reform is underscored by warnings from industry associations regarding Germany’s offshore wind power installations, which stood at 9.2 GW as of June 30, 2023, the same level projected for the end of 2024. This stagnation reflects broader challenges facing the offshore wind industry globally, including supply chain issues and regulatory hurdles.
In May, Orsted, the world’s largest offshore wind project developer, acknowledged the ongoing difficulties within the sector. The lack of bids in Germany’s recent auction highlights the pressing need for policy changes that can revitalize interest and investment in offshore wind energy.
As Germany grapples with these challenges, stakeholders across the industry will be watching closely to see if the government takes action to reform the auction process. Without meaningful changes, future auctions may continue to face similar obstacles, jeopardizing the country’s ambitious energy transition goals.
