A view of the turbines at Orsted's offshore wind farm near Nysted, Denmark, September 4, 2023. REUTERS/Tom Little
COPENHAGEN: Denmark has received no bids in its largest-ever wind power tender, delivering a major blow to European efforts to boost renewable energy and reduce fossil-fuel demand.
The Danish Energy Agency didn’t receive a single offer by last Thursday’s deadline in the tender to develop three offshore wind farms, it said in a statement.
It will now initiate a dialog with the market to find out why.
Denmark, the birthplace of offshore wind, is seeking to triple its capacity by the end of the decade.
It already boasts the world’s largest share of wind in its power grid.
But that legacy hasn’t been enough to overcome the soaring costs that have stunted growth of the technology that was once one of the fastest-growing sources of green power.
“The Danish offshore wind flop should be a surprise to no one,” Esben Hegnsholt, managing director at Boston Consulting Group in Copenhagen, wrote in a post on LinkedIn.
“Like the naked Emperor, the only ones that seem surprised are the protagonists themselves – politicians and opinion makers visibly far from reality of the industry.”
Offshore wind has broad political support in Denmark, and Europe has pinned its climate and energy security ambitions on a rapid expansion of the technology.
Between the European Union and the United Kingdom, countries aim to have some 150 gigawatts (GW) of capacity by the end of the decade, more than quadruple today’s level.
The failure of the Danish tender puts that goal further out of reach and similar struggles to attract new investment in neighbouring Sweden show it’s not an isolated case.
The tender didn’t offer subsidies or fixed prices like some others in Europe and in the United Kingdom. That left developers susceptible to market prices that can hit zero or even turn negative when conditions are windiest.
There also aren’t as many major industrial customers in Denmark as there are in neighbouring Germany and the Netherlands that could sign contracts to purchase the power.
“We did not see a way to hand in a bid where there was the right balance for us between risk and reward,” Rasmus Errboe, deputy chief executive officer (CEO) of Denmark’s Orsted A/S, said in a statement.
“For that reason alone, we have chosen not to bid in this round to ensure that we use our capital in a responsible way which creates value for our owners.”
He also cited factors including high interest rates and inflation, as well as supply-chain bottlenecks.
The Danish effort was the first round of a tender to establish at least 6GW of wind power at sea in six parks by 2030.
Climate and Energy Minister Lars Aagaard said the recent results were “very disappointing”, and that they “do not give rise to great optimism” for the other three farms in the tender.
Furthermore, the deadline for these bids is in April.
Denmark, a country of about six million people, is home to some of the world’s largest wind-energy companies, including Vestas Wind Systems A/S and Orsted.
The new offshore parks, in which the state would take stakes of 20%, are vital for Denmark to reach its target to become carbon neutral in 2045.
The tender’s failure follows a similar result in the United Kingdom in recent years.
Last year a government-run auction failed to draw any bids from offshore wind farms because the power price was too low for companies to make profits from the project.
As a result, Britain boosted the price significantly to revive interest in a subsequent auction earlier this year.
“The green transition in Denmark has stalled right now,” Kristian Jensen, CEO of industry group Green Power Denmark, said in a statement. — Bloomberg
