Amended WindSeeG welcomed, but two-stage model ‘a barrier to projects being realised’

The decision to adopt CfDs for offshore wind energy, and explore the use of indexation, was welcomed by the BWO, the German Offshore Wind Energy Association, but the association says there is a ‘considerable need’ for improvements to the version of the draft Offshore Wind Energy Act (WindSeeG) adopted on 2 September.

“The mandate to examine the possibility of indexing CfDs is a positive step,” said the BWO. “However, improvements are needed during the parliamentary process, particularly concerning tender design and the return of projects from the 2023 to 2025 tender years.”

The BWO said it continues to reject the proposed two-stage tendering model in the draft amended legislation, and has again called for a ‘CfD-only’ model. As the draft stands, auctions for offshore wind will begin with a ‘dynamic bidding process’ without a price cap. CfDs will only be introduced if there are not bids at this stage of the process.

The BWO said that, from its perspective, this creates what it described as ‘perverse incentives’ that ‘reward willingness to pay and take risks, instead of focusing on the actual feasibility of a project.’

At the same time, it said, risks remain for project developers, project financing, and the supply chain. “A CfD-only model would reduce these risks while maintaining competition for the lowest price,” the BWO said.

The decision to examine the use of indexation was welcomed by the association, which said it would take account of cost increases between projects being awarded and constructed. The BWO said it is ‘crucial that this becomes a binding regulation in the further legislative process.’

BWO managing director Stefan Thimm said, “The fact that the German government is now explicitly examining indexation is an important signal. This must be translated into concrete regulations during the parliamentary process.

“Between the award of a contract and commissioning, five to seven years can elapse before commissioning takes place. Several important European offshore wind markets already factor cost developments into their systems. Without indexation, Germany will face a competitive disadvantage, both in terms of financing and in deciding where companies will invest in the future.”

The BWO said it is also essential that a ‘return option’ for projects awarded in the period between 2023 and 2025 remains essential. It also welcomed a planned reduction in tender areas to 1 GW to 1.2 GW in capacity, down from a maximum of 2 GW. “Smaller areas will strengthen competition and increase the diversity of market participants,” the BWO said.