Strong criticism of government tender -- Denmark's next offshore plant

If the Danish government fails to change the proposed terms for its invitation for bids for construction of the country's next major offshore wind station it might as well cancel the tender, says the national wind turbine owners' association, Dansk Vindmølleforening (DV). As proposed, the tender framework is worse than that which has put a stop to all wind plant development on shore, adds DV.

The EU-wide tender is to be issued in the new year for the third of five 160 MW demonstration offshore wind plants the government has said it wants to see built. The first two, at Horns Rev and Nysted, were built by the utility sector under a government obligation. The government's intention is to grant construction concessions for the third plant before the end of next year. Early development work will start in 2005, with final project approval in 2005 or 2006. The offshore wind station is expected to be in operation in 2007-2008.

Nobody will bid

As the proposed tender stands, terms on offer are the same as those for development on land: electricity must be sold on the open market for whatever price can be achieved, plus a possible bonus as long as the maximum total price does not exceed DKK 0.36/kWh (EUR 0.048/kWh). Bidders are invited to also compete on grid links to shore.

DV is convinced that nobody will bid for the contract under these terms, given that offshore wind plant are more expensive to build than those on land. If the intention of the tender is to see the project built and electricity produced at the lowest possible price, competition could be encouraged in two ways, says DV. Bidders could compete for a production incentive, with the request for the smallest incentive winning the contract. Or bidders could compete for capital grants for the construction phase, with the bidder requesting the smallest cash subsidy deemed the winner.

The advantage of capital grants for construction only is that the cost of the project to the taxpayer is known from the outset. Once constructed, it is up to the plant to earn its keep -- and any profits for the owner -- on the open market. In either cases, both consumers and the country benefit from a competitive process to ensure generation of electricity at the lowest possible price. In addition, a good indication is provided of what the wind industry believes is the real cost of building an offshore wind station, says DV's Asbjørn Bjerre.