Last week, Denmark launched an offshore wind auction that could award up to 6 GW, enough to meet the country’s electricity needs.
Currently, Denmark has 2.7 GW of offshore wind capacity, so this auction could triple that figure. The tender includes six areas, three in the North Sea, two in the Kattegat, and one in the Baltic Sea.
One curiosity about this auction is that promoters have the option to install more GW than those awarded, so that the additional capacity can be used to produce renewable hydrogen and other derivatives. The Danish state itself estimates that up to 10 GW could be awarded.
However, the allocation system is based on a somewhat curious negative bidding system. Promoters will bid an annual payment for 30 years for the right to use the marine space, and logically, the highest bidders will be the winners.
This could result in considerably higher project costs, depending on the risk participants are willing to take, potentially leading to lower installed capacity. Additionally, the state will have a 20% ownership in the parks, though I’m unsure through what formula.
Another interesting point is that the auction also includes social and environmental criteria (non-price criteria) for the prequalification of participants.
