In the first of two German auction rounds, the Bundesnetzagentur awarded DONG Energy the right to build three offshore wind projects in the German North Sea. DONG Energy submitted six projects in the bid and won with three projects that have a total generating capacity of 590 megawatts (MW):

• OWP West (240 MW)

• Borkum Riffgrund West 2 (240 MW)

• Gode Wind 3 (110 MW)

For two of the projects – OWP West and Borkum Riffgrund West 2 – Denmark-based DONG Energy made bids that do not include a subsidy on top of the wholesale electricity price. The Gode Wind 3 project was awarded based on a bid price of EUR 60 per megawatt-hour.

Samuel Leupold, executive vice president and CEO of wind power for DONG, says the zero subsidy demonstrates the technology's "massive global growth potential as a cornerstone in the economically viable shift to green energy systems."

The zero bid for two of the three projects was enabled by a number of circumstances in this auction. First, the realization window is not until 2024, which allows developers to use next-generation turbine technology, which is expected to reduce costs. Also, grid connection is not included in the bid.

The three projects are planned to be commissioned in 2024, subject to Final Investment Decision by DONG Energy in 2021.

DONG Energy will be responsible for the turbines, array cables and offshore substation. Grid operator TenneT will be responsible for construction, operation, and ownership of the onshore substation and the export cable.

DONG Energy currently has 902 MW of offshore wind in operation in German waters, with Gode Wind 1&2 and Borkum Riffgrund 1 and another 450MW under construction at Borkum Riffgrund 2, which is expected to be commissioned in 2019. In total, DONG Energy operates 3,600 MW offshore wind capacity across Germany, UK and Denmark, and has a further 3,800GW under construction.

Cost-drivers enabling the zero subsidy bid include:

• Platform change: Significantly bigger turbines – probably 13-15 MW, DONG says – will be on the market by 2024. With bigger turbines, the developer can increase electricity production and reduce the number of turbine positions. This contributes to cost reductions during construction (fewer towers and array cables, and lower costs for installation vessels and manpower) as well as during a lifetime of operations and maintenance.

• Scale: OWP West and Borkum Riffgrund West 2 will be combined into one large-scale project with the option of adding additional volume in a 2018 auction to further increase the total size of the project.

• Location: The projects benefit from average wind speeds of more than 10 m/s, which is among the highest wind speeds measured across DONG Energy’s portfolio of wind farms. Also, the projects are located next to DONG Energy’s Borkum Riffgrund 1&2 which means that operations and maintenance can be done from DONG Energy’s existing O&M hub in Norddeich.

• Extended lifetime: The German authorities have approved the possibility to extend the operational lifetime of the asset from 25 to 30 years.

• Not full scope: Developers were not bidding for the grid connection in the German auction, which means that grid connection is not included in the bid price.

In advance of its final investment decision in 2021, DONG Energy says it will monitor factors that include the impact of EU actions to reinvigorate the European carbon trading scheme; the phase-out of conventional and nuclear capacity; the future role of coal in Europe; and the build-out of onshore transmission grids.