Don't use record-low French price as new floating wind benchmark, warns WindEurope
Debut commercial tender should be seen as 'unique' and not a precedent, says industry body
The record-low bid that clinched victory in France’s recent floating wind auction for a 250MW array off South Brittany should be seen as a one-off that sounds an alert about the need to make adjustments to tendering criteria, according to industry body WindEurope
The winning bid of €86 ($92.3)/MWh submitted in a first ever commercial floating wind tender against a ceiling price of €140/MWh sent ripples of surprise across the industry when France published the results on 15 May.
In its own analysis WindEurope said that the South Brittany tender should be seen as a special case.
“The winning bid was… a record-low for floating offshore wind. But governments must not think this is a new benchmark for floating wind development in Europe,” the body said.
Describing floating wind as a relatively young industry where technical and commercial risks are still “pretty high” WindEurope said it is too early to tell what the price range for large-scale floating wind is going to be in Europe.
“We congratulate the winners. But governments around Europe must not be mistaken, this auction was unique,” said WindEurope's CEO Giles Dickson.
“Governments must consider the specifics of this particular auction when defining their auction budgets and ceiling prices. Don’t take the €86/MWh bid price as a benchmark. Otherwise you might find yourself in a similar situation to the UK last year. The UK’s 2023 offshore wind auction had a low ceiling price because they made the wrong assumptions about costs – and nobody bid,” he warned.
WindEurope argued that the South Brittany tender was “unique in many ways”, not least because project developers do not have to pay for the grid connection, export cables or for the offshore substation.
“The French Transmission System Operator RTE will build and operate the grid connection and cover the costs. Second, the site conditions were extremely good with strong wind speeds and favourable water depths. Third, the Contract for Difference (CfD) offered is robustly indexed to inflation, taking into account different raw material prices,” WindEurope stated.
France 'must change' auction design
WindEurope put France's inaugural floating wind tender under the microscope, noting that price made up 75% of the total assessment of the different bids.
Another 5% was based on the robustness of the contractual and financial arrangements and the remaining criteria were linked to social and territorial development as well as environmental protection and sustainability.
France's use of a mix of pre-qualification and non-price award criteria and the offer of extensive indexation were lauded, but the trade association argued that non-price criteria used in the South Brittany auction left room for improvement.
Among its observations and recommendations, the industry body argued:
- The 5% robustness criteria should be reinforced in future auctions — WindEurope urged governments to make this “ability to deliver” a binding pre-qualification criterion and said bidders scoring low on this criterion "should be excluded from the auction".
- The South Brittany auction rules encouraged bidders to build their project with as few turbines as possible. WindEurope said this pushed bidders to plan their projects with wind turbines of 20MW and more, into the realm of turbines that don’t exist in the current market. This was described as increasing the project risk and "the risk of bidders having to go for non-European turbine, in turn threatening Europe’s energy security".
- The award criteria used in the South Brittany auction failed to ensure the necessary differentiation between bids. On the social-territorial development criteria all bidders scored the maximum, effectively increasing the weight of the price criterion in differentiating the single bids.
WindEurope urged France to make changes "as soon as possible" ahead of a busy period of tendering activity for offshore wind there.
These include two more floating wind tenders of 250MW each (Med I+II) where bidding is expected to open imminently, and the planned launch of three more bottom-fixed offshore wind auctions of 1GW, 1.5GW and 2.5GW (AO7, AO8, AO9) later this year. Another auction of up to 8-10GW of capacity (AO10) is also being prepared
On floating wind, WindEurope acknowledged that South Brittany has important symbolic value.
"The South Brittany auction opens the door for big volumes of floating offshore wind to come. Europe could have 3GW of floating offshore wind by 2030 if the relevant auctions are completed by the end of 2025," the statement read.
(Copyright)