Welcoming the new targets for offshore wind of at least 30GW by 2030, 40GW by 2035 and 70GW by 2045, they warned that industrial electricity prices could rise by up to €21/MWh, according to NERA Economic Consulting, because of the newly anchored bid component of the tender framework. It echoes a warning given by RWE and Commerzbank last month when they unveiled a joint plan for 1GW in German waters.
The new German offshore wind tender design "puts the price for the expansion of the areas in the North Sea and Baltic Sea first and foremost", said industry organisations BWE, BWO, the German Offshore Wind Energy Foundation, VDMA Power Systems and WAB in a joint statement.
They added: "In the future, project developers will first have to put money on the table – similar to the auctions of mobile phone licenses – in order to even start to build an offshore wind energy project."
Under the proposed system, instead of an award based on the lowest costs, the bidder willing to pay the highest price for the rights to use the area receives the permit. The Netherlands has introduced a similar 'bid price' component, but this is capped at €50 million. No such cap is proposed for the German tenders.
"Depending on the focus of the project developers, the cost pressure on the value chain, which is already weakened by the lack of expansion, will increase," said the industry organisations. “The federal government and the offshore wind industry cannot afford fundamental mistakes in the tender design if the first milestone for 2030 is to be achieved. The bid component should therefore be cancelled as soon as possible or, as in the Netherlands, capped."
Germany has fallen behind its international counterparts due to the freeze on offshore wind development in recent years, they warned. The latest first half year offshore wind status report produced for the industry organisations by Deutsche Windguard shows there was 7.8GW of offshore wind operating in German waters by end June 2022, with a further 0.6GW under construction.
A final investment decision had also been made for several projects with a combined capacity of 1.6 GW by the end of the first half of 2022, while another 1.9 GW of projects were awarded in the tenders for offshore wind energy, although they have not yet reached a final investment decision.
"A functioning system that removes obstacles in the international competition for resources, specialists and investors is all the more important,” the coalition said.
They added: "Sustainability criteria, such as the integration of offshore-produced energy into our power grid, practicable and thus realisable decarbonisation contributions from planned offshore wind energy projects, the economic production of green hydrogen, and the strengthening of European industry should be in the foreground."
Such criteria should be consulted on with the wind energy industry and standardised at European level to avoid unnecessary costs, the German industry groups suggested. "The criteria that have now been introduced must be adapted in a pragmatic and targeted manner in cooperation with the industry in order to unfold their intended effect. Here we see an urgent need for correction in the current WindSeeG.”
Wind-to-hydrogen urgency
Urgent measures also need to be taken if Germany's goals for hydrogen production from offshore wind are to be achieved, the coalition added. Under the new offshore wind law, six annual tenders for 500MW of installed capacity from 2023 are planned to meet the country's offshore wind-to-hydrogen 2030 goal.
But the industry organisations warned: "2030 is practically today. Offshore projects have long lead times. The de facto standstill of recent years, as well as the corona pandemic, have left deep scars in the supply chain. Now the need for production capacities at home and abroad is increasing significantly. A special industrial policy effort with fair international competition is necessary. The production facilities of manufacturers and suppliers must be expanded in Europe, and functioning supply chains must be guaranteed. The upgrading of shipyards and ports as well as special shipbuilding is essential and must be politically supported."
Skills gap
A skills shortage could also be crippling, they said. "Over the past three years, more than 3,000 jobs have been lost in the German offshore wind industry. As a result, the industry has a high demand for well-trained specialists - many good staff have migrated abroad as a result of the lack of expansion."
They called for "a large training and qualification offensive supported by federal government" to help recruit specialist staff in a targeted manner. "Concrete ideas, such as training clusters for wind energy, can help cover the need for skilled workers. The training criterion that has now been adopted in the WindSeeG is in itself an interesting approach to promoting training, but is probably very complex when it comes to selecting the successful bidder,” the industry organisations said.
