Swedish energy giant Vattenfall is to build what is highly likely to be the first subsidy-free offshore wind farm to be commissioned in Europe’s waters, it was announced late on Monday.
The 700-750MW Hollandse Kust Zuid offshore wind farm, in Dutch waters, is due online in 2022 according to the Netherlands government. This means it will almost certainly be commissioned before three subsidy-free offshore wind projects in German waters, totalling 1.4GW, all of which are expected online between 2024-25 .
The Dutch energy ministry amended its offshore wind tender rules last year to allow zero-subsidy bids , and it was already known that such bids had been tabled in this tender. But it was only revealed on Monday that Vattenfall was behind the successful bid.
The furthest forward trades that ICIS has seen OTC for Dutch power are for 2021 delivery. Of 51 baseload deals since the start of this year – a fairly healthy number in a short space of time, allowing for a firm assessment of the price – The average transaction has been just under €39.00/MWh, with €38.75/MWh the most recent.
This would represent a huge cost reduction. The first two Dutch offshore wind tenders, both held in 2016, achieved strike prices of €72.70/MWh in July and, later in December, €54.50/MWh for the Borselle III and IV projects.
Therefore the cost reduction against Borselle III and IV is at least around €16.00/MWh, across a little over a year.
Click here for an ICIS Briefing on falling offshorewind costs in Europe.
Vattenfall’s senior vice president for wind said on Monday the award was in part due to the company’s “continuous cost reduction efforts”.
Offshore wind costs have been driven down by technical advancements, larger and more efficient turbines as well as by administrative arrangements in how national tenders are organised, with some costs, which would previously have been borne by the successful developer, now met further upstream in some cases by the body overseeing the tender.
According to the Dutch tender rules, the Hollandse Kust Zuid farm needs to be fully operational within five years after the permit has been awarded. This would give Vattenfall until 2023 to commission, one year after the government has said it will come online, potentially allowing for minor delays.
Vattenfall said it will now make the final preparations for the project “including the design of the wind farm, continuation of the internal planning and finalising the tender process for major components”. jamie.stewart@icis.com
See ICIS Power Perspective for a full European offshore wind cost reduction analysis and the impact on the wholesale electricity market.