26 April 2024
Denmark’s latest offshore wind auction could award enough capacity to meet the country’s entire electricity demand
This week Denmark opened an offshore wind tender which could award up to 10 GW. If successful, the awarded capacity would be enough to meet all of the country’s electricity demand. It could also be used to produce renewable hydrogen and other green fuels. It remains to be seen whether the auction design will attract investors and deliver on these very large volumes.
Denmark has nearly 3 GW of offshore wind today. The new Danish offshore auction aims to connect another 6 GW offshore wind to the grid. Six wind farm areas are tendered in the auction. Three in the North Sea, two in the Kattegat and one in the Baltic Sea.
Developers have the option to install more wind capacity in their tendered areas than the volumes initially planned by the Government. The additional capacity can be used to produce renewable hydrogen and other green fuels. The Danish State estimated that this could result in the construction of 10 GW offshore wind, or even more. Excellent. We need to deploy large volumes to reach Europe’s energy security and climate targets and benefit from the economies of scale.
If successful, the auction could generate massive value for Denmark and the wider region. New research shows it would trigger a total investment worth over €13bn. The construction of the wind farms is expected to bring around 12.000 jobs. However, hurdles in the auction design may deter potential investors.
Uncapped negative bidding will be used to award the sites. This imposes additional costs on wind farm developers and may lead to less wind energy being built.
On a positive note, the auction features improved pre-qualification criteria, setting crucial social and environmental standards. Among other things, they ensure compliance with human rights and include measures against social dumping. This will support enabling a level-playing field with non-European competitors. The auction also introduces an innovation on State participation. The Danish State will co-own 20% of each wind farm.
