January 3, 2018 Read More →

Is Subsidy-Free Offshore Wind Power the Next Big Thing?

Financial Times:

Europe’s renewable energy industry is used to breaking records for generating more power from low carbon sources.

Yet two recent milestones stand out.

Vattenfall, the Swedish energy group, and Norway’s Statoil were among the companies that took the market by surprise before Christmas when they bid in the world’s first exclusively subsidy-free offshore wind auction, held by the Dutch government.

Many had thought the auction would be “too challenging” for offshore wind farm developers given the early delivery date for projects of 2022, said Wouter Hertzberger, a partner at law firm Norton Rose Fulbright.

There were similar landmark bids in a German offshore wind auction in April, when Orsted, the Danish energy giant previously known as Dong Energy, and Germany’s Energie Baden-Württemberg became the first companies to offer to build schemes by 2024 that would rely on market power prices alone.

The German and Dutch auctions have given policymakers across the continent hope that the industry’s reliance on government-guaranteed electricity prices could soon come to an end. Such subsidies are funded through consumer and industry energy bills.

But investors, analysts and developers are yet to be convinced that subsidy-free offshore wind farms will become the “new normal”. There is also some scepticism about whether all of the subsidy-free bids submitted will be delivered. How subsidy-free offshore schemes will be funded is “the biggest single worry for investors in the market”, said one investment banker involved in renewable projects.

Orsted’s CEO, Henrik Poulsen, has acknowledged investor concerns. “We are . . . well aware that our zero-subsidy bid may have come earlier than what the market has expected,” he told investors during a call in April, shortly after the German auction.

More:  ($) Winds of change blow through renewable energy market

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