RWE to build largest wind farm in Danish waters after tender winner decided by lot

German company RWE has won the tender to build the largest offshore wind power plant in the North Sea. The plant, named Thor, will have an installed capacity of 1 GW and will receive no support for its generation. On the contrary, RWE will pay the Danish state for the right to build and operate the wind farm.

Winning Wednesday's tender for the right to build an offshore wind farm in Danish waters required not only the best bid, but also a certain amount of luck.

Interest in building the park at the site called "Thor" was so high that several participants offered not only the minimum price in the tender, but also the highest capacity (note: the minimum tender price was just 0.1 DKK/MWh (or 1.5 eurocents/MWh) and the maximum offered installed capacity was 1 GW). Under the rules, in such a case the winner was decided by a random draw.

The tender, which also attracted companies including Orsted, Vattenfall, SSE, Eneco and TotalEnergies, was ultimately won by the aforementioned German company RWE. As the tender winner, it will instead pay for the right to build the plant. RWE will pay the Danish state approximately EUR 400 million in total. Construction costs are estimated at EUR 2.5 billion.

After RWE repays the aforementioned EUR 400 million, no further financial transactions will take place between the Danish state and RWE. The repayment is expected to occur during approximately the first three years of operation.

"The tender for the Thor offshore wind farm is another milestone in the history of Denmark's offshore sector. For the very first time, the operator of a wind farm will pay the Danish state for the right to build an offshore wind farm. The competitive prices offered in the tender are all the more surprising because, for the first time, the tender winner must also cover the cost of the transmission line and grid connection," said Kristoffer Böttzauw, director of the Danish Energy Agency, commenting on the tender result.

At a time of currently high commodity prices, a number of bidders were willing to build the offshore wind farm entirely without subsidies. As S&P Global Platts adds, although electricity prices (and commodity prices in general) are expected to decline from current levels, revenue can also be generated from the sale of so-called guarantees of origin, whose price the outlet estimates at approximately EUR 2/MWh in 2025.

About the Thor offshore wind farm

The Thor offshore wind farm is the first of three large wind farms set to be built in Danish waters. The plant will be built in the North Sea, just 22 kilometres from the coast.

The plant can be connected to the grid no earlier than at the beginning of 2025. However, it must be connected and commissioned by 2027 at the latest.

In the tender, RWE secured the right to operate the plant for 30 years, with the option to extend operations by a further 5 years.