Germany 'must revise offshore tender design' after TotalEnergies win

The wind industry was relieved that another gigawatt of German North Sea wind power capacity was allocated this week but alarmed at the drastically shrunk number of bidders in the second, negative bidding round.

That concern has prompted new calls for the government under Chancellor Friedrich Merz to revamp the tendering system.

The French oil & gas giant had faced only one other bidder in the so-called dynamic bidding procedure that is held in Germany’s tendering scheme if more than one party hands in a zero-subsidy bid at an early phase of the tender.

The auction design in Europe’s second-largest offshore wind market needs revision as negative bidding makes sea-based wind more expensive, industry group WindEurope said.

“Negative bidding creates additional costs which have to be passed on to consumers and the wind energy supply chain. It may be a short-term gain for finance ministries. But it’s a long-term cost for society,” WindEurope CEO Giles Dickson said.

Negative bidding also diminishes the number of developers for wind at sea in Germany, the group added, as only two bidders were willing to participate in the negative bidding round this year. That was down from between seven and nine bidders in a similar auction last year for two North Sea sites.

The tender result makes clear that the current auction design has structural weaknesses, Germany’s offshore wind foundation said.

“An auction with only two bidders and a bid value that is far below the level of past tender results is an unmistakable warning signal. Sticking to the current tender design can hardly be justified,” the foundation’s managing director Karina Würtz said.

“It is particularly striking that even the short-term auction revenues, which were considered a success in previous years, are now falling significantly.

“This development reflects the increased market risks and makes it clear that the previous focus on high bid amounts will lead to rising electricity prices in the long term, jeopardise domestic value chains and increase the risk of project cancellations.”

Overplanting ‘thwarts economic viability’

The measure has been introduced as a test for greater system efficiency, as it should allow more days on which the wind farm can run at the full grid connection capacity.

“The overplanting must not lead to a project densification that thwarts the economic viability of the project,” cautioned Dennis Rendschmidt, managing director of VDMA Power Systems, a group representing offshore wind manufacturers and their suppliers.

The group also said that it is important to expand the time developers get to provide the operational readiness of offshore wind farms from six to at least twelve months “to reflect the real requirements for large projects”.

Under Germany’s Wind at Sea Law, developers are required to have connected 95% of the capacity won at tender six months after the grid link to the wind farm has been established by the transmission system operator (TSO), otherwise the award will be withdrawn.

“This is an extremely sharp sword in light of supply bottlenecks, which the investor, in all likelihood, has no control over,” said Stefan Thimm, managing director of Germany’s offshore wind federation (BWO).

The BWO, WindEurope, VDMA Power Systems and the Offshore Wind Foundation therefore all agree that the country’s auction design needs to be changed.

"The new German government urgently needs to revise the tender design this year,” VDMA Power System’s Rendschmidt demanded.

“The revenue model from 2026 on must better guarantee project realisation and investment security, for example, through contract for difference mechanisms (CfDs).”

Most European offshore wind markets have now adopted two-sided CfDs based on the UK support system, which guarantee developers and operators a minimum revenue.

When reforming the auction system, Germany’s government should also be cautious to get it “harmonised” with other European markets, and not curtail potential power purchase agreements, VDMA Power Systems stressed.

Also, when applying non-price criteria, those “must avoid disproportionate bureaucratic hurdles and be based on EU-wide harmonised specifications and requirements”, Rendschmidt said.

Germany this year is also auctioning off another 2.5GW of offshore wind capacity across two pre-developed sites. The auction closing on 1 August 2025 will use a combination of negative bidding and non-price criteria.