The encyclopedia · Strategy & Leadership · Strategic decision · 2012–2016
Denmark's offshore wind tender produced a record-low €49.9/MWh bid for Kriegers Flak
Denmark's Nov 2016 Kriegers Flak tender went to Vattenfall at €49.9/MWh — about 60% below the 2012 cap, among the lowest offshore-wind subsidies ever.
Danish Ministry of Energy, Utilities and Climate
the move
Offshore wind was among the most expensive energy sources, and Denmark's 2012 political agreement set a price limit for new offshore projects. Critics doubted the technology could approach that ceiling.
On 9 November 2016, Energy Minister Lars Chr. Lilleholt announced Vattenfall had won the 600 MW Kriegers Flak tender in the Baltic Sea with a bid of €49.9/MWh (about 5 eurocents/kWh) — roughly 60% below the agreed 2012 limit, after fierce competition among six bidders.
The Danish ministry called it one of the lowest levels of subsidy ever for offshore wind, and the project was expected to power more than 600,000 households. The tender showed the price of offshore wind collapsing to near-market levels within a few years.
why it works
- Competition among six bidders forced the winner to reveal its true cost.
- A pre-announced ceiling gave bidders a target and the state a budget bound.
- The record bid made the case that offshore wind could compete without large subsidies.
what transfers
A transparent ceiling plus real competition can make suppliers reveal true costs — the same discipline works for any procurement where the buyer does not know the seller's cost.
what came after
Kriegers Flak went on to become one of the world's least-expensive offshore wind farms, and Denmark's tender design became a reference for the European renewable auctions that followed with zero- and low-subsidy outcomes.
references
- New record low price for offshore project in Denmark
- Sweden's Vattenfall wins another Danish wind farm project (Reuters)
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