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Posted 11/07/2016

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Dong hits key milestone with Dutch deal

Dong Energy’s latest offshore wind tender win marks a milestone moment for the sector. The Danish utility has agreed to break the €100/MWh barrier.

Earlier this month, Dong won the Dutch government’s tender to develop Borssele 1 and 2, two 350MW developments in waters off the coast of the Netherlands. In doing so, the firm agreed a strike price excluding transmission of €72.70/MWh for the first 15 years of the project. This means Dong can build the schemes for under €100/MWh when transmission costs are factored in.

This also beats the previous record low at the Horns Rev 3 project off Denmark, where Vattenfall won a tender in February 2015 to build at a strike price of €103/MWh excluding transmission. The fact this has been beaten by almost 30% just 17 months later shows how fast offshore wind is progressing.

Four years ago, Dong Energy set itself the target of achieving a levelized cost of electricity of €100/MWh by 2020, and at Borssele it could build a scheme that achieves this. It is true that this site benefits from favourable seafloor and wind conditions, but such a low production cost could not be possible if it were not for the constant technological progress being made across all aspects of offshore wind. Now Dong must deliver.

Borssele 1 and 2 are set for completion by 2020 and represent a commitment by the Dutch government for green energy. The bid came in far below the expected €124/MWh and is being hailed as saving the government €2.7bn in subsidy payments over 15 years. This is a significant saving for the Dutch people, but the true value of this deal goes far beyond that.

There can be no doubt. This announcement answers the critics, by showing that offshore wind can be economically feasible and has a key role to play in Europe’s energy mix. This deal will bolster competition within the industry as Dong’s competitors strive to compete.

Of course, the idea of the €100/MWh ‘barrier’ is somewhat artificial. There is no real barrier to ‘break through’. Even so, it is a significant milestone that should resonate across the energy industry. And with no signs that the fall in production costs looks set to level off, offshore wind is here to stay.

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