The outcome of the first tender for wind-onshore has been highly anticipated. The price expectations fluctuated significantly until the end. The approved capacity to this point – approximately 1000 MW[1] at an advertised capacity of 800 MW – indicated a rather moderate competitive pressure.
However, the outcome of the offshore tender already created a lot of discussion material. Two participants won with bids of 0 EUR/MWh, i.e. they forgo a fixed remuneration. Furthermore, the amount of participating citizen energy companies represented an additional unknown. Their tender conditions[2] differ in relevant aspects from conditions for regular participants. Citizen energy companies get the remuneration of the highest approved bid instead of their own. This approach increases the price pressure for regular participants, because they get the remuneration of their own bid. Therefore their bid has to take into account both, their own costs as well as the expected competition pressure. The fact that citizen energy companies do not need the BImSchV[3] authorisation at the time of the respective tender impedes an accurate ex-ante estimation of the competition pressure.
With 2,137 MW this first tender was oversubscribed by a factor of 2.6. Almost 70 % of the tenderers were citizen energy companies. A glance at the outcome shows to what extent their participation has been underestimated and to what extend they dominated the first tender. Their quota of the approved bids stood at more than 90 %. Only roughly 6 % (5 out of 87) of the regular participants received an approval of their bids.
The resulting prices speak for themselves: The highest approved bid was 5.78 Cent/kWh. The low number of approved bids of regular market participants shows that they estimated significantly less competition and price pressure. One can speculate that citizen energy companies expected less competition from within their own ranks as well. This means that more bids of regular participants would have been approved and would have increased the price level.
For the upcoming tender on 1st of August 2017 the question arises how the market will process this outcome. Will the 5.78 Cent/kWh be the new benchmark? Will citizen energy companies adjust their bidding strategy? One can expect that the tenderers will include the recent price level in their bids. Conversely, in order to avoid approval of an unprofitable bid amount, citizen energy companies will have to take into account their own project costs more intensively in their bidding strategies.
Two further questions arise for the actual expansion of wind power: First, will the expansion path be met? How many projects will not be realised with the bids lying slightly under the monetary expectations of the tenderers, i.e. how many market participants will retreat now? Second, when will the wind farms go into operation? If many projects now have four and a half years (citizen energy companies) [4] instead of two and a half (regular participants)[5] for the realisation, many wind farms could go into operation later than expected. The reasons for a later building are both, possible decreasing project costs and (as well-known since the offshore tender) increasing market prices. The wind sales values in four and a half years, hence starting in the year 2022, are expected to rise as well due to the exit from nuclear power and growing CO2-prices. Thereby sales values higher than the recent bid amounts and a higher profitability would be possible.
The first onshore-tender did raise many new questions and created new challenges.
[1] https://www.bundesnetzagentur.de/DE/Sachgebiete/ElektrizitaetundGas/Unternehmen_Institutionen/ErneuerbareEnergien/Ausschreibungen/Wind_Onshore/Wind_Onshore_node.html and https://www.bundesnetzagentur.de/DE/Sachgebiete/ElektrizitaetundGas/Unternehmen_Institutionen/ErneuerbareEnergien/Anlagenregister/Anlagenregister_Veroeffentlichung/Anlagenregister_Veroeffentlichungen_node.html
[2] https://www.bundesnetzagentur.de/DE/Sachgebiete/ElektrizitaetundGas/Unternehmen_Institutionen/ErneuerbareEnergien/Ausschreibungen/Wind_Onshore/Ausschreibungsverfahren/Ausschr_WindOnshore_node.html
[3] BImSchV = Federal Emissions Protection Ordinances
[4] https://www.bundesnetzagentur.de/DE/Sachgebiete/ElektrizitaetundGas/Unternehmen_Institutionen/ErneuerbareEnergien/Ausschreibungen/Wind_Onshore/Buergerenergiegesellschaften/Buergerenergiegesell_node.html
[5] https://www.bundesnetzagentur.de/DE/Sachgebiete/ElektrizitaetundGas/Unternehmen_Institutionen/ErneuerbareEnergien/Ausschreibungen/Wind_Onshore/Ausschreibungsverfahren/Ausschr_WindOnshore_node.html
