The encyclopedia · Strategy & Leadership · Strategic decision · 2018
Netherlands tendered offshore wind with zero-subsidy bids; Vattenfall won
The Dutch state ran a zero-subsidy offshore wind tender, paid for the grid connection, and Vattenfall built Hollandse Kust Zuid with no subsidy.
Vattenfall · Government of the Netherlands
the move
By 2018, European offshore wind costs had fallen so far that a well-sited project could beat wholesale power prices. The Dutch government's tender for the Hollandse Kust Zuid sites accepted only bids that required no public subsidy, then ranked bids on qualitative criteria.
The state removed the two risks developers could not price: it took the grid-connection cost and gave visibility on future market volumes. That made a zero-subsidy business case credible, and Vattenfall won against Statoil and Innogy.
The two 350 MW farms, due online by 2022, were the world's first offshore wind built without public subsidy. WindEurope credited the design: governments that take on manageable project risks can turn offshore wind into an unsubsidised market.
why it works
- Only zero-subsidy bids were allowed, so the price the state paid was exactly zero.
- Qualitative criteria let environmental and design quality break ties without reviving subsidy competition.
- State-funded grid connection removed the largest unhedgeable cost from the developer's model.
- Volume visibility gave bidders the confidence to commit to merchant-market revenue.
what transfers
When costs have crossed the market price, remove the one risk developers cannot hedge and let zero-subsidy bidders compete on quality.
what came after
Hollandse Kust Zuid came fully online in 2023 with 150 turbines, selling power on the wholesale market. Its success pushed the Netherlands to repeat the model in later rounds and became the template cited by developers and regulators arguing that offshore wind no longer needs subsidies.
references
- World's first offshore wind farm without subsidies to be built in the Netherlands
- Dutch wind tender awarded to Vattenfall
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