Denmark cancels offshore wind auction, revises terms after last year's debacle

The offshore wind sector has faced a difficult few years, with projects grappling with steep cost increases. This is reflected in investors’ reluctance to pay for the sites they have won for their projects; instead, they are seeking support. The Danish government has announced that it plans to cancel the ongoing auction for 3 GW of capacity and replace it with a process offering more attractive terms.

Whereas a few years ago offshore wind developers competed in auctions with bids for zero support, the situation is different today. The main reason is rising costs for developing offshore wind farms across the entire supply chain. Developers are therefore beginning to reassess their projects, and in several cases projects have even been put on hold.

The less favourable situation compared with previous years is also affecting auction results in individual European countries. For example, Norway held its first-ever auction for offshore wind farms last spring, but several established developers ultimately did not take part, saying the risks and uncertainty were too high. Developments in the offshore energy sector are also affecting German auctions, where developers are less willing to pay for sites for offshore wind farms, and auction revenues in Germany are falling.

Last year’s auction also ended badly in Denmark, which has long been a wind power powerhouse in Europe. Not a single bid was submitted in the latest auction. Developers were not bidding for guaranteed feed-in tariffs for their projects; instead, they were supposed to compete over who would offer the state the most for the right to build a project. The Danish government has therefore decided to cancel the next round, in which bids for up to 3 GW of installed capacity could be submitted by 5 April, according to S&P Global.

State support set to return in place of payments

The country’s energy ministry cited a combination of rapidly rising costs, pressure across supply chains and uncertainty about the pace of growth in demand for green energy as the main reasons, according to the news outlet. The newly revised auction, which is expected to offer 2 to 3 GW of capacity, is set to include the option of state support and give developers greater flexibility.

Details of the new type of auction are not yet known. For now, the government has announced that it has agreed with other political parties to cancel the current auction and set new terms. The government is expected to present the new auction design later this year, with the first round due to take place in spring 2026.