KEY POINTS
- Denmark’s offshore wind tender failed to attract any bids.
- Rising inflation, interest rates, and supply chain issues deterred companies.
- Shell and other energy giants are reducing offshore wind investments.
Denmark’s latest offshore wind tender in the North Sea has ended in disappointment, with no companies submitting bids, authorities confirmed Thursday.
This setback comes amid rising challenges within the global offshore wind industry, further complicating efforts to meet ambitious government targets to combat climate change.
The tender, which was launched in April, offered six sites in the North Sea, Baltic Sea, and Kattegat, with a combined capacity of up to 10 gigawatts.
However, the auction had no subsidies, which meant companies had to take on all the financial risk for the projects. The deadline for bids on the North Sea sites passed on Thursday, and the remaining sites in the Baltic Sea and Kattegat have an April 2025 deadline. Despite initial interest, no companies stepped forward to compete.
Rising costs and interest rates discourage investment
“This is a very disappointing result,” said Denmark’s Energy and Climate Minister Lars Aagard. He pointed to the rapid changes in offshore wind conditions, including steep rises in both costs and interest rates.
According to Reuters, the tender’s lack of subsidies left companies wary of the risks involved, particularly as inflation, supply chain disruptions, and financing challenges weigh heavily on the sector.
Orsted, a leading Danish offshore wind developer, stated it had decided not to participate because of the unfavorable risk-reward balance. The company cited the rising costs of materials and logistics, as well as increasing interest rates, as key factors in its decision.
“We need industry and policymakers to work together to create the right conditions for the future of offshore wind,” said Orsted’s Chief Commercial Officer Rasmus Errboe. The company’s withdrawal signals the increasing difficulty of balancing the costs and rewards of major offshore wind projects in an environment of economic instability.
Major energy players shift focus from offshore wind
The situation in Denmark mirrors broader trends in the global energy market. Shell, one of the world’s largest energy companies, announced on Wednesday it would reduce its investments in new offshore wind projects.
This shift is in line with similar moves by other energy giants, who are reevaluating their commitment to offshore wind due to rising costs and reduced financial returns.
Denmark, home to turbine maker Vestas, has long been a pioneer in the wind energy sector. With its strong winds and favorable geography, the country has led the way in both onshore and offshore wind development.
However, as the global energy transition becomes more complicated, even Denmark’s strong position in the wind industry is facing increasing challenges.
The lack of interest in the latest tender could have significant implications for Denmark’s renewable energy ambitions.
The government had hoped to build on its offshore wind success by offering sites without subsidies, encouraging competition, and lowering energy costs. However, without bidders, the country may need to rethink its strategy for expanding offshore wind capacity.
