European countries plan to auction support for 40 GW of offshore wind farms this year

Europeancountries plan to auction support for 40 GW of installed capacity of offshore wind farms this year, three times more than in 2023.Although last year was a record year for new offshore wind installations, annual capacity additions would need to be several times higher to meet climate targets. This was reported by WindEurope.

The five largest countries organising support auctions for renewable energy include Germany, Denmark, the United Kingdom, France and the Netherlands. In 2023, Europe auctioned support for 13.5 GW of new offshore wind capacity.

Despite the positive outlook, problems persist, particularly the widespread use of negative bids in auctions in 2023, WindEurope warned. In this case, instead of receiving support, developers commit to paying for the right to build power plants at a designated site. In Germany, for example, however, winning an auction includes connecting the wind farm to the onshore transmission grid, meaning developers do not have to cover these costs.

"In 70% of all auctions in 2023, unlimited negative bidding was used, requiring wind energy developers to pay for the right to build an offshore wind farm. This must change," said WindEurope, the main European lobbying group for wind energy.

This approach, in which wind energy developers have to cover the additional costs associated with negative bids, poses risks such as potentially shifting the costs to consumers or the wind energy supply chain, affecting capital costs and jeopardising project delivery, it added. In Germany, for example, none of the major projects awarded in auctions with negative bids in 2023 has yet reached a final investment decision, the report said.

Offshore record, targets difficult to meet

According to WindEurope, last year was the best year on record for new offshore wind installations in both the EU and Europe as a whole. In 2023, 4.2 GW of offshore wind capacity was installed in Europe, 1.7 GW more than in the previous year.

Europe should build around 5 GW of offshore wind capacity annually over the next three years, the association said. However, it warns that the EU will not meet its climate and energy security targets. European countries will need to build 24 GW of offshore wind capacity annually between 2027 and 2030 to meet the 2030 targets.

"The offshore wind supply chain today, however, can produce only around 7 GW per year," the report said.

The European supply chain is seeing a turnaround, with new factories announced in Poland, Denmark, Germany, the Netherlands and Spain, WindEurope says. However, it adds that investment is needed to expand existing factories and build new ones, as well as in grids, ports and vessels.