Denmark’s Offshore Wind Tender Fails to Attract Bids

Denmark’s ambitious plans to expand its offshore wind capacity faced an unexpected challenge. The first phase of its 6 GW tendering procedure closed without receiving a bid. This marks a surprising development in a country widely recognized as a global leader in offshore wind energy, raising questions about market readiness and tender design.

No Bids for North Sea Wind Farms

The deadline for bids on the three North Sea wind farms—North Sea I A1, A2, and A3—expired on December 5, 2024, without any submissions. This starkly contrasts the initial market dialogue phase, where numerous companies expressed interest.

Denmark’s Minister for Climate, Energy, and Utilities, Lars Aagaard, has instructed the Danish Energy Agency to engage with industry stakeholders to uncover the reasons behind this lack of participation. Aagaard emphasized the importance of understanding these barriers to ensure the success of future tendering rounds.

Context of the Tendering Procedure

The 6 GW offshore wind tender is Denmark’s most ambitious renewable energy project. Divided into two rounds, it includes:

• First Round: Three wind farms in the North Sea, with a December 5, 2024 deadline.
• Second Round: Three wind farms in Danish coastal waters—Hesselø, Kattegat, and Kriegers Flak II—with a bid deadline of April 1, 2025.

The procedure allows for overplanting, potentially enabling developers to install capacity beyond the 6 GW minimum, reaching up to 10 GW or more. However, the subsidy-free tender requires annual concession payments and 20% state co-ownership in each project.

Challenges Facing the Tender

While Denmark’s leadership in offshore wind is undisputed, the absence of bids suggests that developers may face significant hurdles. Potential issues include:

1. Economic Pressures: The requirement for subsidy-free projects, coupled with concession payments and state co-ownership, may strain financial viability for developers.
2. Rising Costs: Global supply chain constraints and inflation have increased the cost of offshore wind projects, potentially deterring investment.
3. Regulatory Complexity: Strict sustainability and social responsibility requirements, while commendable, could complicate project planning and execution.

Moving Forward: Dialogue and Adjustments

The Danish Energy Agency’s upcoming meeting with industry stakeholders is crucial to identifying and addressing these challenges. Three additional wind farms in coastal waters are still open for bids until April 2025, so there is time to adapt the tendering framework to attract developers.

Denmark’s long-term offshore wind strategy remains ambitious. To meet its 2030 targets, it aims to triple its current capacity of 2.7 GW. This setback highlights the importance of balancing policy goals with market realities to sustain the momentum of Denmark’s renewable energy leadership.

A Pioneer in Wind Energy

Denmark has been a pioneer in wind energy, with offshore wind playing a pivotal role in its renewable energy strategy. 

• Installed Capacity: As of 2023, Denmark's offshore wind capacity stood at approximately 2.3 gigawatts (GW).
• Electricity Generation: In 2023, offshore wind farms produced 8.57 terawatt-hours (TWh), accounting for 24% of Denmark’s total electricity demand.
• Global Leadership: Denmark was the first country to install an offshore wind farm, Vindeby, in 1991. The government continues to lead offshore wind development, with plans to increase capacity to 18 GW by 2030 and 35 GW by 2050.
• Economic Impact: The wind industry significantly contributes to Denmark’s economy, with major companies like Vestas and Ørsted leading globally in wind turbine manufacturing and offshore wind development.

A Broader Implication for Offshore Wind

This situation underscores a growing global challenge in the renewable energy sector. Even in a mature market like Denmark, external economic and regulatory pressures can influence developer participation. The outcome of Denmark’s next steps will not only shape its energy future but also serve as a valuable case study for other nations striving to expand offshore wind capacity.