Ørsted Concerned by 'negative bidding' for German Offshore Wind

Mads Nipper, chief executive of Ørsted - ©Ørsted

A new offshore wind tender that allows bidders to compete on their willingness to pay the German government rather than receiving subsidies could ultimately result in higher power prices, Ørsted's CEO said on Wednesday.

Germany's federal network regulator on Tuesday launched a tender for offshore wind turbines in four areas in the North and Baltic seas, with a total capacity of 7,000 MW.

The tender will use a "dynamic bidding process" which means that if multiple companies forgo government subsidies, the one with the greatest "willingness to pay" will be win the lease.

"We don't think that is the best way of going about securing the build-out of offshore wind," Mads Nipper, chief executive of Ørsted, the world's biggest developer of offshore wind, said.

"Whether it is negative bids, sky-high auctions for seabed, or concession payments, we risk that power prices will ultimately end up higher for the consumers," he told reporters.

Some 90% of the proceeds from the bids will flow into reducing electricity costs, 10% into marine conservation and the promotion of environmentally friendly fishing, Germany's network regulator said.

The multi-stage process is designed to protect bidders from hasty or risky bidding, the regulator told Reuters.

Nipper said that this risks attracting "bidders who may not be experienced or financially disciplined enough" to actually develop the projects.

Germany's wind industry association WAB said companies in the sector should not be burdened with price pressure.

"The offshore wind industry had already massively reduced costs before the expansion stop in Germany," Thorsten Preis, a spokesperson for the association, told Reuters.

(Reuters - Reporting by Jacob Gronholt-Pedersen in Copenhagen and Riham Alkousaa in Berlin; Editing by Alexander Smith)