2 June 2020
“You’ve got to pay for the right to build offshore wind.” What?!
Yes, that’s what Germany is proposing. If two or more companies bid to build a wind farm purely on income from the electricity market, then Berlin thinks whoever offers to pay the government more should build it.
Germany already allows “zero bidding” where you earn the market price. And that’s bad enough. The costs of financing “zero bid” wind farms is 250 basis points higher than those that have a “Contract for Difference” (CfD). Because the banks prefer the revenue stability you get with a CfD.
“Negative bidding” would make things even worse. Many companies don’t like bidding at zero. Even fewer would want to pay. And who knows what interest the banks would charge.
No, Germany, go for CfDs. They’re cheap for government: you pay out when prices are low but get paid back when they’re high, so there are no windfall profits. And they’re cheap for society: the higher finance costs from zero bidding add 25% to the total cost of a wind farm.
The UK, Denmark, France and Poland all do CfDs for clean energy.
You want to build more offshore wind – great! But the industry and banks are not going to want to build it for you if you allow negative bidding. And you’ll miss out on the jobs.