Swedish power company Vattenfall has been awarded the contract to build two 350 megawatt offshore wind farms in the Netherlands which, upon completion in 2022, will be the first offshore wind farms to be built without subsidies.
Authorities in the Netherlands opened its first subsidy-free offshore wind power tender in December of 2017 seeking bids for the construction of the Hollandse Kust Zuid offshore wind farm which will be made up of two 350 megawatt (MW) projects. Vattenfall announced on Monday that it had been successful in the auction and would proceed with developing the project, which could have a maximum capacity of between 700 to 750 MW.
“This is excellent news for Vattenfall and the Netherlands,” explained Magnus Hall, Vattenfall’s President and CEO. “It is a significant step for us in view of our ambitions to grow in renewable energy production. We have previously announced that we intend to invest SEK 13 billion (EUR 1.5 billion) in growth investments in wind power for the period 2017-2018. The Netherlands is an important market for us and this will be our second offshore project there. It’s a great honor for us to get the opportunity to contribute with this project to the transformation of the Dutch energy system.”
The rules of the December tender were that the project would be completed within 5 years, which puts the completion date, at the latest, sometime in 2022. This is important because while the Hollandse Kust Zuid offshore wind farm is not the first project to be awarded a subsidy-free tender it will, in fact, be the first to reach operation.
A year ago, Germany’s first competitive auction for offshore wind not only yielded an average bid price which was “far below expectations,” but also included what was believed to be the world’s first subsidy-free offshore wind projects. Specifically, DONG Energy (now Ørsted) won the right to construct the 240 MW OWP West and the 240 MW Borkum Riffgrund West 2 with bids of zero government subsidy required. All projects awarded in the April 2017 auction are expected to be completed in 2024, meaning that while they technically receive the award for first offshore wind farm awarded a subsidy-free contract, they won’t be the first to begin operating.
“Winning the bid for Hollandse Kust Zuid is a result of our continuous cost reduction efforts along our entire value chain and the solid track record and portfolio approach of our company,” added Gunnar Groebler, Vattenfall Senior Vice President Business Area Wind. “We are very happy to enlarge our contribution in making the Dutch energy system more sustainable and support our customers, large and small, on their way to become climate smarter.”
The Hollandse Kust Zuid offshore wind farms are set to be located 22.2 kilometers off the west coast of the Netherlands and will have a maximum capacity of between 700 and 750 MW — likely hovering in that middle area due to the potential availability of larger offshore wind turbines.
The announcement was heralded by offshore wind and renewable energy proponents in Europe as a landmark occasion.
“This news shows zero-subsidy bids are possible for some developers in some markets not least where Governments take on and manage a share of the project risk,” said Giles Dickson, CEO of the European wind energy trade body WindEurope.
“In this instance the Dutch Government taking care of the grid connection is a significant factor. Plus the Dutch Government has successfully minimised the risk linked to offshore wind by giving clear visibility about future market volumes. And the new Dutch Government has committed to bring in a carbon floor price at national level which will help the business case for offshore wind.
“Wind energy is showing again and again that it can deliver ever more capacity for less cash. That’s the key message other governments should take from this: they should revise their ambition upwards in their national energy plans and offshore wind is a great way to help them do this.”