The Borssele series: Dutch figures behind offshore wind’s first price milestones

Before it was named one of the backbones of energy transition and saw multiple new projects announced worldwide, and in more countries than ever before, offshore wind had one main quest – cost reduction. While this is, to some extent, also true today – the industry has long passed the price thresholds set several years ago and a few of the sector’s firsts in this regard happened in the Netherlands.

Back in 2016, the Dutch government announced the winners of its first two Borssele tenders, first in July when Ørsted (then DONG Energy) crossed the mark of € 100/MWh by bidding 7.27 Eurocents per KWh, and then five months later when the Blauwwind consortium made headlines with a new record price – 5.45 Eurocents per KWh – thus brining the sector close to its aim of reaching levelized cost of energy (LCoE) of EUR 50 per MWh.

This led to the cost of building and operating the Borssele 1 & 2 offshore wind farm to be some € 2.7 billion cheaper than previously estimated and Borssele 3 & 4 to have even higher subsidy savings – needing a subsidy of only € 0.3 billion instead of the originally anticipated subsidy of € 5 billion.

And to top it all, the Netherlands saved some room in the Borssele Zone to support offshore wind innovation to bring the costs further down and to facilitate novel approach to building sustainable offshore wind farms. At the Borssele V innovation site, the Dutch government is backing demonstration projects with € 15 million and the electricity produced by the two wind turbines installed there with a maximum subsidy of € 35 million.

So, how did the Netherlands reach the point where the country would pay less in subsidies while also keeping the developers interested in building and operating wind farms off its coast?

According to the Dutch government, setting up a tendering process based on competitive bidding – under which the developers are awarded both subsidies and permits – and the government taking care of all conditions for building offshore wind farms were the key reasons for the low strike prices offered.

Before the competitive procedure was implemented, companies had to receive consents before they could compete for a grant. Moreover, installing the export cables to connect the offshore wind farms to the grid on land was also the developers’ responsibility.

Now, the Netherlands sets the stage for the construction of offshore wind farms, including siting, consents, as well as the connection to the electricity grid which is now being taken care of by TenneT. The government also makes an operating grant available and the projects receive subsidies for the renewable energy they generate.

Looking at the developers who won the rights to build the Borssele 1 & 2 and Borssele 3 & 4 projects – which are now fully operational – financing the construction and operation of the world’s cheapest offshore wind farms at the time also did not appear as much of an issue.

Ørsted as the leading offshore wind developer already had a portfolio of both operational projects that were producing electricity and those under development, and vast experience with offshore wind technology, construction, operation, and supply chain.

And the Blauwwind consortium behind the second Borssele project is a partnership between the investors Partners Group, Diamond Generating Europe, the oil and gas giant Shell, offshore construction specialist Van Oord, and the Dutch offshore wind developer Eneco.

Van Oord is also part of the Two Towers consortium that won the Borssele tender for the innovation site, which also comprises Investri Offshore and Green Giraffe Holding.

Now that all three Borssele offshore wind projects are up and running, the next Dutch move in offshore wind is materialising with the world’s first subsidy-free offshore wind farm – the 1.5 GW Hollandse Kust Zuid – now under construction.

Undoubtedly powered by the cost reductions achieved in the Borssele tenders, but also by Germany’s first subsidy-free auction in 2017, the government awarded Vattenfall at the tender for Hollandse Kust Zuid 1 & 2 in March 2018 and then in July 2019, the company won the tender, also without subsidies, to develop the Hollandse Kust Zuid 3 & 4 project.