Factors Driving Europe’s Newest Big Offshore Wind Market

Guidehouse’s Energy practice has launched the first annual progress report of the Dutch offshore wind market, Dutch Offshore Wind Market Update 2019. Guidehouse prepared this snapshot of offshore wind developments in the Netherlandswith help from multiple organizations. These organizations include the Dutch Wind Energy Association (NWEA), GROW, and TKI Wind op Zee. 

The update offers the market an authoritative source for the status of offshore wind in the Netherlands. This blog summarizes some key points of the 20-page market assessment and emphasizes why there is so much interest in the Dutch offshore wind market. 

Ambitious Plans

First and foremost, the Dutch government’s ambitious plans for offshore wind arecoupled with an effective policy to implement its vision. In 2013, the Dutch government agreed to bring an additional 3.5 GW of offshore wind online by 2023 and reach a total of 10.6 GW by 2030. 

The new offshore wind energy roadmap 2030 outlines nine development zones, of which five have been tendered and are under various stages of development, which is progressing as planned. The first new projects are scheduled to come online in 2020 (Borssele I-IV, totaling 1,483.5 MW) and 2022 (Hollandse Kust Zuid I-IV, totaling 1,500 MW), followed by continuous steady capacity increases until 2030.

Included Companies and Tenders Won

Dutch-based companies Nuon, Shell, and Eneco led the early rounds of offshore wind development in the Netherlands. They are followed by international developers Northland Power, Ørsted, and Vattenfall, which have since entered the market. Dutch companies aim to stay competitive through vertical cooperation (i.e., partnership between developers and supply chain companies).

The Dutch offshore wind program uses a floating feed-in-premium scheme under the Netherlands Stimulation of Sustainable Energy Production (SDE+) tender and subsidy legislation. Successful companies with the lowest bid price that meet all the specified requirements win a 15-year subsidy grant and a 30-year permit to build, operate, and decommission the wind farm. 

Ørsted, the developer of Borssele I-II, won the tenders at €72.70/MWh ($79.49/MWh) and a consortium including Shell, Van Oord, Eneco and Mitsubishi/DGE won Borssele III-IV at €54.50/MWh ($59.59/MWh). 

While the first two price decreases are notable, even more notable was the next two tenders that were won at zero subsidy. The first two subsidy-free concessions were awarded to Vattenfall in 2018 (Hollandse Kust Zuid I and II) and 2019 (Hollandse Kust Zuid III and IV). These zero-subsidy bids were evaluated based on their qualitative merits regarding identification and mitigation of revenue, construction, and operational risks. 

Offshore Wind Tender Prices

(Source: Guidehouse)

The first ever zero-subsidy wind farm commissioning is planned in the Netherlands at the Hollandse Kust Zuid sites in 2022. Concurrently, Germany has held subsidy-free tenders and awarded the first project to be commissioned in 2024.

The chart above highlights recent pricing in various recent offshore wind tenders and the decreases are unmistakable. However, it should be noted that there is no 1:1 relation between the tender prices and levelized cost of electricity from actual projects. It is not possible to determine the cost level for zero-subsidy projects, as this is only known to the developer. The projects have therefore been included at €0/MWh (the subsidy level, not the actual cost level).

See Guidehouse's Dutch Offshore Wind Market Update 2019 for more information.