DWIA

The Danish Wind Industry Association

Again, in 2016, Denmark has drawn international attention in regards to offshore wind. The reason for all the attention can be boiled down to the fact that Denmark in the future will be home to the world’s cheapest and most competitive offshore wind farms.

DWIA
Rosenørns Allé 9, 5. floor
1970 Frederiksberg C
Denmark

11 Jan Hylleberg
+45 (0)33 73 03 30
www.windpower.org
danish@windpower.org
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Again, in 2016, Denmark has drawn international attention in regards to offshore wind. The reason for all the attention can be boiled down to the fact that Denmark in the future will be home to the world’s cheapest and most competitive offshore wind farms.

Observers and players in the international offshore wind industry that haven’t learned to pronounce Kriegers Flak and Vesterhav Syd and Vesterhav Nord, better start practicing. The three names encapsulate the transformation of the game of offshore wind energy as the latter two parks are the outcome of the so-called Danish Nearshore Tender (DNS), and currently have the world’s lowest LCOE for offshore wind of 54.50 Euro/MWh. They are followed by the 600MW-tender on Kriegers Flak which has a LCOE of 55.90 Euro/MWh, making it the world’s second cheapest. Both tenders were won by Vattenfall with record low strike prices of 63.80 and 49.90 Euro/MWh for DNS and Kriegers Flak respectively for at CfD-based FIP-model with a subsidy period of 50,000 full load hours corresponding to approximately eleven years.

All in all, looking back to 2010 the price of offshore wind has been cut in half.

Why is this happening now and in Denmark?

Denmark is not the only country experiencing price drops on offshore wind. This is currently also taking place in the Netherlands and we expect it to take place in all countries where tenders are being used. However, it is no coincidence that the major push in mitigating costs is driven from Denmark. The Danish Energy Agency has done a good job in running the whole one-stop-shop 0

tender process leading to international interest with strong competition as the result. In total six consortiums were qualified to bid on Kriegers Flak and three on the 350MW DNS tender. On top of that the entire value chain, including some of the most experienced offshore companies, have a base in Denmark, which means that knowledge and products must travel a shorter distance.

Until now, the Danish wind industry has been involved in all offshore wind farms installed, and the majority of all wind turbines installed offshore are ‘Made in Denmark’. This obviously influences the value chain in a positive way, making all focused on innovation and cost-out-drivers. Both aspects are crucial to bringing down the LCOE.

The siting and scope of the tender concept behind the three wind farms is also of relevance to the low LCOE. Especially the DNS turbines are special in regards to siting, as they do not require a transformer offshore due to their four to ten kilometres distance to shore and the grid connection to the point of common coupling onshore is built and owned by the developer. In regards to the concept, they are also special, as Vattenfall – the developer – must offer for sale 20 per cent of the entire project to locals at cost price. Also a loss of value scheme has been put in place meaning that the developer will have to reimburse neighbors who experience a loss of value on their property – if any.

In the Baltic Sea, Kriegers Flak is also a part of a unique concept, as it will be grid-connected both to Denmark and Germany acting as an interconnector also.

Energy agreement is fulfilled

It is no secret that another reason for some of the international attention on Denmark this year has been related to the political situation regarding DNS. Already in May the Government announced that it wanted to scrap the projects to save funds. Later – after the tender price was revealed – the political pressure on the Government increased and in November 2016, the DNS were approved along with Kriegers Flak.

In 2016 we also saw the conclusion of a 28MW-tender for test turbines to be built off the coast of Nissum Bredning. This project will test new methods and technologies, brought to market primarily by Siemens Wind Power. The conclusion of all the tenders means that the wind energy aspects of the 2012 energy agreement are largely fulfilled, and that Denmark thereby will add additionally 1,378MW to the existing capacity of 1,271MW. The new capacity is enough to power 1.40 million Danish homes.

Looking ahead

In the coming years, the European offshore market is set to decline slightly in regards to MW installed, bringing about more competition. This will present opportunities for some players and I expect that we will also see more consolidation within the offshore industry as it adjusts to the market size along with market openings such as in the United States.

In June 2016, we saw the Danish government along with eight other countries around the North Sea come together and sign a ‘North Seas Agreement’. The agreement is set to harvest both low hanging fruits in regards to planning, and regulatory barriers thus eliminating e.g. different demands for blade paint between countries as well as other statutory requirements. The Danish government attaches great relevance to this initiative and will take an active role supporting the messaging of the offshore wind sector. We look forward to the start of the delivery phase of this initiative in 2017. On a larger scale, the agreement will also look into the alignment of tender timelines and other larger, strategic measures that hopefully will help to lower the costs in the industry. We have big expectations towards the agreement and we hope that it will help to add more MW to the pipeline, especially in the North Seas, as we go forward.

In light of the development in 2016 and especially the competitive prices on offshore wind seen on Vesterhav Syd and Nord and Kriegers Flak, we have big expectations to the coming years. The development in offshore wind seems to continue to amaze and looking to 2017 and beyond, we have a strong belief in the sustainability of the technology and in the companies active in offshore wind.

 
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