Europe’s latest wind offshore auction based on non-price criteria was successful

The Hollandse Kust West (HKW) tender’s “Site VII” results were released by the Netherlands Enterprise Agency (RVO). It is the most recent significant non-price auction. The winning bid came from RWE subsidiary Oranje Wind Power II. A 700 MW offshore wind farm will be built. Additionally, their plan calls for 225MW of electric boilers for industrial use and district heating, 600 MW of onshore electrolysers for the production of renewable hydrogen, batteries, and floating solar energy.

Using quality criteria effectively is demonstrated by this auction. Governments are able to assess bids based on precise and measurable standards. How well the wind farm will be integrated into the Dutch energy system was the main topic of discussion at the HKW “Site VII” auction. In total, qualitative criteria accounted for 90% of the scoring. The results for “Site VI” of HKW, which were also determined by 90% non-price criteria but this time with a focus on biodiversity, will be presented by the Dutch next month.

By using these criteria, it is acknowledged that wind energy has broader social benefits, such as preserving biodiversity and ensuring the efficient operation of the larger energy system. They will compensate the wind industry for its investments there, including in the creation of pertinent technology. According to the State Aid Guidelines for Energy issued by the European Commission, non-price criteria may account for up to 30% of the scoring in Contract for Difference (CfD) auctions. The Dutch can have an even higher rate because they do not use CfDs. In their most recent offshore wind auction for a 1 GW wind farm off Normandy, France is using non-price criteria in addition to the Netherlands for 25% of the scoring. In order to determine which offshore wind farms will not receive government support, the German government will use four non-price criteria. And Belgium is seeking input on a wide range of standards.

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Non-price criteria must complement current policies and be clear, comparable, and simple to measure. They must refrain from significantly raising administrative or management expenses for competitors. Moreover, capitalize on the advantages of the wind industry and encourage additional innovation. 10% of the final score was only based on the bid’s financial component. The project will not receive any financial assistance from the Dutch government. Instead, this score was determined by the bidders’ willingness to give the government up to €50 million. The government did well by capping these counteroffers. Although governments may profit from negative bidding, negative bidding increases the costs for wind farm developers. Consumers who are having trouble paying their energy bills or the supply chain, many parts of which are already operating at a loss, will have to bear the burden of these costs.

Although this auction was a success, the auction setup could still be strengthened. Developers invest a lot of money and time into making sure their projects meet all of the non-price criteria. At a time when Europe urgently requires additional generation capacity to address the energy crisis, those who did not win despite competitive bids will not be able to construct any projects. By concurrently auctioning more capacity, this problem could be resolved. The IJmuiden Ver auction, which will take place in the Netherlands the following year, already allows for this. It would be ideal if this included multiple GW. Giles Dickson, CEO of WindEurope, said: “It’s great that the Dutch used non-price section criteria so heavily in their most recent offshore wind auction. It also worked! They have demonstrated that it is possible to move beyond price-only auctions and choose a winner using quantifiable, objective, non-price criteria, in this case on system integration. Non-price criteria honor the societal contributions made by the European wind industry and reward their investments in things like biodiversity and system integration. For the rest of Europe, it sets a wonderful example. The fact that there were too many losers in this auction is the only issue. The answer is to hold larger auctions. Europe desires to erect numerous new wind farms. And many businesses want to construct them. Every time, the Dutch and other governments ought to offer more GW for auction.

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