Developers will compete at tender to offer the lowest price per energy unit for the 800MW-1GW project, slated for a nearshore site off the Central Jutland region, the energy ministry stated.
The winner will receive state support based on the difference between the contract price and the market price - similar to the UK’s contract for difference scheme.
If the market price is lower than the agreed price, the developer will receive state support to bridge the gap. If it is higher, the developer will return the excess to the state.
Industry body Wind Denmark welcomed the news, adding that the support mechanism would "ensure investor security, low financing costs and competition for the lowest price".
The government added that it will monitor developments in the price of electricity each year and adjust the level of support offered.
Thor will be the first Danish offshore wind farm awarded under a new permitting process.
Developers will compete for the full scope of the project, meaning that the winning investor will have to build the offshore wind farm and the onshore transmission connection. This cost will also be included in the settlement price being offered.
The Danish government aims to tender Thor and two other projects before 2023, but extra environmental impact assessments could delay the wind farms’ deployment, Wind Denmark previously warned.