The Netherlands cuts offshore wind auction to a third, fearing lack of investor interest

The Dutch government has decided to reduce the size of the next auction for offshore wind farms. Developers will compete for just one site with the potential to build 1 GW of capacity, instead of the three sites originally planned. The government cited a lack of interest from potential participants as the reason. Plans to auction the remaining two sites have not been cancelled entirely, but have merely been postponed for now. Even a successful auction, however, may not lead to a project being built, as demonstrated by the recently cancelled Hornsea 4 project in British waters.

The Dutch government said late last week that it would postpone auctions for two planned offshore wind farm sites. It plans to launch an auction in September for just one site in the North Sea. The size of the upcoming auction will therefore be cut from the originally planned 3 GW to just 1 GW.

The Dutch Ministry of Climate said in March, according to Reuters, that interest in the auction was very low. The statement followed comments from Eneco and Orsted, which said that without guaranteed support, the auction did not represent a viable business proposition for them.

Auctions without support are too risky for investors

According to Reuters, the Dutch government is exploring ways to bring operating support back into auctions. After several auctions requiring zero support, European countries have begun changing their auction models. However, with costs rising and the offshore wind industry’s supply chain facing generally adverse conditions, auctions without a guaranteed purchase price pose too great a risk for investors.

One example is last year’s offshore wind auction in Denmark, which ended in total failure. The auction’s failure even led to this year’s round being cancelled. In response to the worrying results, the country’s government energy agency found in its investigation that the main reason last year’s auction failed was that the projects were no longer viable.

According to Dutch Climate Minister Sophie Hermans, the government should present plans for a new auction model by the third quarter. The government had originally promised to present its new plans by mid-April this year.